Tax exemption cap to be raised, but not this year

Senator Ralph Recto. INQUIRER file photo

MANILA, Philippines—The Senate is expected to approve on final reading by next month the bill raising the tax exemption cap for bonuses, even as finance officials are appealing that approval of the measure be delayed so it would take effect beginning in 2015.

However, even if the bill raising the tax exemption cap for the 13th-month pay and other benefits from P30,000 to P82,000 is approved now, it is unlikely to be implemented in time to affect this year’s bonuses.

After Senate approval, the measure will go to the bicameral conference committee where it will be reconciled with the House of Representatives’ version, before it is submitted to the President for his signature. Once signed, it will still have to be published before it can take effect.

Sen. Ralph Recto disclosed on Thursday that finance officials had requested that the bill be delayed so that that it would take effect in 2015 instead of 2014.

Even before the Senate approved the measure on second reading, government finance officials also tried to stop its sponsorship in the plenary last month on the basis of a new study that showed high revenue losses for the government, according to Sen. Sonny Angara.

Collection targets

Recto told reporters on Thursday that finance officials wanted to delay approval of the measure because they had 2014 collection targets to meet.

“If I’m not mistaken, there was a request from the executive (branch) not to have it this year, and move it to next year if possible,” he said, later citing finance officials as the ones who made the request.

Recto said he had no problem with granting the request as he believed that if the measure were to be submitted to the President for effectivity this year, it just might be vetoed.

But if it were up to him, Recto said he would have wanted the bill to take effect immediately.

“I was willing to put an amendment in the bill so that it would be effective immediately, but there seems to be a request… that’s part of compromise,” he said.

But he pointed out that the tax exemption cap was raised to P82,000, from the original P75,000 proposed in the committee version of the bill.

He said the P82,000 was a more proper adjustment for inflation. The original P30,000 tax exemption cap had not been adjusted since 1994, even though finance officials could have done so during that 20-year period, he said.

Bill not supported

Angara said the Department of Finance had never been supportive of the bill, and it had requested him not to sponsor it at the plenary last month, citing a new study on revenue losses.

He said he rejected the plea because the ways and means committee that he chairs had already conducted three hearings on the measure.

Angara earlier said the figures on revenue losses that finance officials had cited were bloated, based on studies conducted by other experts.

The senator also said that the best argument for passing the law, despite revenue losses, was that it would put more income at the disposal of workers.

“What’s the use of government having a lot of money if its people would have none, if they can’t bring home the result of their sweat and hard work,” he said.

Internal Revenue Commissioner Kim Jacinto-Henares on Thursday warned that because of the resulting lower tax collection if the law is passed, the government may have to “sacrifice” some of its publicly funded programs.

“If you give that (taxes on bonuses) away, you have to lower certain expenditures if you want to maintain the deficit. You lower the expenditure, you have to choose what program to sacrifice. Those are decisions somebody has to make. And they would have to be responsible and accountable for that decision. That is not a decision [the] BIR has to make,” she said.

The BIR would also have to lower its revenue targets if the exemption law is approved, said Henares.

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