Exactly thirty days from today, we will be celebrating Christmas. The Christmas season is the longest celebration we observe in the Philippines. It starts as early as first week of November right after All Saints’ and All Souls’ Day rituals. Mall stores are the first ones to spruce up their stalls with Christmas decorations.
That’s how Christmas celebration has been commercialized. It’s not only here in the Philippines but people all over the world have come to associate the Christmas season with increased commerce and more goods and holiday items to celebrate the season.
Thus, many employers, including the government, give out their Christmas bonuses to their employees as early as possible.
It would have been a merrier Christmas this year for the many fixed-income earners had our legislators approved on time the proposed law passed upon already by both chambers of the 16th Congress. This is the bill that would have increased to P82,000 the cap on tax exemption of 13th month pay and other bonuses of employees in both the public and private sectors.
The existing ceiling under Republic Act 7833 mandates 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 income tax.
As it turned out, it was an intentional delay that they, pro-administration lawmakers agreed to, upon the prodding – or should we say arm-twisting – of the executive branch. The principal authors and sponsors of this bill at the Senate admitted they were prevailed upon to delay approval of this bill, lest it impair the government’s finances if the law takes effect this year.
Senate President Pro-Tempore Ralph Recto and Sen. Juan Edgardo Angara have separately confessed they got marching orders from no less than Senate president Franklin Drilon. As relayed to them by the Senate chief, the Department of Finance (DOF) had lobbied for this bill not to be passed this year.
Actually, the DOF has strongly opposed the approval of this bill long before it finally advanced in the 16th Congress. The past leaderships in the DOF before its incumbent Secretary Cesar Purisima took over had successfully thwarted the original bills earlier filed in the previous Congresses.
Angara noted the DOF’s vehement objections to his proposed bill as it tried to block its consideration at various stages through the legislative mill in both chambers.
Since it is a tax measure, the proposed bill must emanate from the House of Representatives to approve this first before the Senate approves its counterpart bill.
As the chairman of the Senate committee on ways and means, Angara steered this bill through to its final stage.
He immediately sponsored the bill late October after receiving the House’s version. A congressman for three terms and now a neophyte senator, Angara carried the ball for this bill’s approval despite stiff efforts by the DOF to block it.
It paid off with the approval of the bill on second reading last week. It needs to be approved on third and final reading. But the legislative process does not end there. This will still go through the bicameral conference committee to reconcile and consolidate the Senate and House versions of the bill. After which, the consolidated measure goes back for approval of both chambers.
The enrolled bill then goes for the approval and signature by the President. But before this happens, the enrolled bill is given back to the DOF/BIR for final review. They could recommend either its approval or veto.
Angara’s original proposal under Senate Bill 2437, aims to increase the ceiling to P75,000. At the public hearings conducted, Bureau of Internal Revenue (BIR) commissioner Kim Henares testified that the P30,000 ceiling in 1994 when the existing RA 7833 was approved into law would be equivalent to around P82,000 at present value.
The National Economic and Development Authority (NEDA) validated the BIR chief’s estimate during the same public hearing based on the amounts as adjusted using the inflation of October this year. Based on this estimate, Recto filed a similar proposal but raising the ceiling to P82,000 to restore, as he rightly pointed out, the value of the peso which has been lost to inflation through the years.
From economic calculations, Recto cited, one peso today is worth about 36 centavos. Adjusted to inflation, the present ceiling of P30,000 was adjusted to P82,000 as corrected in the Recto bill.
The two senators, however, debunked the claims of the BIR of the potential P26.8 billion in revenues that the government would lose if this bill would be approved into law. In particular, Angara observed how the DOF has given them conflicting figures on revenue loss, from as high as P43 billion to P39 billion, and later on, they pegged it at P26 billion.
The Philippine Institute for Development Studies (PIDS) and other economists though presented their own estimations at the Senate public hearing that pegged the possible revenue loss could amount to P3.5 billion to as high as P7.3 billion. This was based on the affected sector of employees from the middle class, estimated at 442,000 individual income taxpayers.
The BIR is so afraid that it would not reach its revenue target for 2014 if the bill would cover bonuses for this year. Recto admitted he agreed that the bill be implemented in 2015 rather than lose the bill to presidential veto.
Practically speaking, the DOF/BIR can still stall the implementation of this measure even if this bill is approved into law this year. The DOF and the BIR would be mandated to draft the implementing rules and regulations to enforce the higher ceiling of exemption.
Obviously, however, the approval of such a populist bill is precisely being delayed to make it effective close to the campaign period for the May, 2016 presidential elections.
Unfortunately, the BIR depends largely on withholding taxes they automatically get from us fixed income earners to meet their revenue collection goals each year. One third of our monthly take-home pay goes to BIR. This is not to mention the other mandatory deductions being taken out from our monthly pay slips.
Getting the full amount of our 13th month pay or Christmas bonus, without tax cuts, would surely go a long way to stretch a little bit our purchasing power. But the DOF is playing to the hilt its role of Christmas scrooge. What is one more year of wait? A lot.