Only about two million Filipinos will benefit from the higher tax-exemption cap on bonuses being pushed in Congress, according to the Department of Finance (DOF).
Finance Undersecretary Jeremias N. Paul Jr. told reporters that despite the “very popular” support gained by moves of legislators to jack up the cap on tax-exempt bonuses to up to P82,000 from the current P30,000, only a small portion of the population would enjoy the benefit.
As it is, 96 percent of Filipino workers receive bonuses amounting to P30,000 and less—hence already tax-exempt—so that only 4 percent of workers have bonuses more than P30,000, Paul explained.
Even if the cap is raised to P82,000, as under a measure approved by the Senate on third reading last week, only up to 2 percent of the workforce actually have bonuses between P30,000 and P82,000, according to Paul.
“If I would have my way, I’d rather adjust tax brackets under a comprehensive tax reform package than have a piece meal benefiting only a few,” the finance official said.
“The proposals in Congress to increase the threshold [in tax-exempt bonuses] threaten our fiscal sustainability,” he added, while nonetheless conceding that the DOF expected the passage of such measures by both the House of Representatives and the Senate.
Government coffers stand to lose between P22 billion and P26 billion per year if the cap on tax-exempt bonuses would be brought up, according to the DOF’s computation.
Experts in the University of the Philippines had estimated revenue losses at a lower, maximum of P5 billion a year.
Paul is now on top of the DOF’s moves to put in place comprehensive tax reform that is aimed at widening the tax base while bringing down payments per individual or company.
“We have one of the highest corporate taxes in the region; we certainly have to move them down,” Paul said.
At present, the maximum corporate tax rate in the country stands at 30 percent.
Income tax, meanwhile, has a higher maximum rate of 32 percent.