Senate to tackle exemption of 13th month pay from taxes

MANILA, Philippines - The Senate ways and means committee will hold a public hearing today on bills that seek to increase the tax exemption cap for the 13th month pay of workers and other benefits.

“We want to immediately address the issues raised by our government employees in relation to the taxation of their benefits. It’s sad to hear that some of our workers receive very meager amount of benefits due them. Something has to be done,” said Sen. Juan Edgardo Angara, chairman of the ways and means committee.

While there is a need to understand the predicament of workers, Angara said there is also a need to listen to the concerns of the Bureau of Internal Revenue in terms of the amount that the government stands to lose if the tax exemption ceiling is raised.

Under the current law, the 13th month pay and other benefits, such as productivity incentives and Christmas bonuses, not exceeding P30,000 given to both government and private sector employees are exempted from tax.

The measure, proposed by Senate President Pro-Tempore Ralph Recto, intends to raise the ceiling of the tax exemption to P75,000.

The present ceiling was set by a law enacted almost 20 years ago when the lowest monthly basic salary for government employees was P2,800.

Now, given the adjustments made in the basic salaries, the lowest monthly pay stands at P9,000.

The committee has invited representatives from the Department of Finance, Department of Labor and Employment, Department of Budget and Management, Bureau of Internal Revenue, National Economic and Development Authority, National Tax Research Center, Tax Management Association of the Philippines, Employers Confederation of the Philippines, Trade Union Congress of the Philippines, Confederation for Unity, Recognition and Advancement of Government Employees (Courage) to be resource persons in tomorrow’s public hearing.

“We may not complete the legislative process for this proposed measure in time for this year’s release of bonuses but may serve as a glimmer of hope for our hardworking Filipinos that in future Christmas seasons, they would enjoy more of their hard-earned money,” Angara said.

Recto said his proposal is premised on the fact that the prevailing conditions in 1994 – the year Republic Act No. 7833 or the statute that imposed the P30,000 cap was enacted – no longer apply to present circumstances.

“At that time, the lowest monthly basic salary for government employees (Salary Grade 1, Step 1) was P2,800 and that of the President of the Philippines (Salary Grade 33) was at P25,000,” Recto said.