Press Release
February 2, 2012

Higher tax-exempt bonuses of workers looms

Cheery Yuletide thoughts in the month of hearts.

Sen. Ralph G. Recto yesterday said more government and private workers would enjoy higher tax-free bonuses and other benefits up to P60,000 to P72,000 once the P30,000 ceiling on tax-exempt benefits is increased.

"In the midst of soaring prices oil, commodities and utilities like power and water, the approval of this measure will give our workers something to look forward to at the end of 2012," Recto, Senate ways and means chair, said.

He said the current P30,000 cap on tax-exempt bonuses as provided in the National Internal Revenue Code (NIRC) is outdated, denying state and private employees higher bonuses such as their 13th month pay.

Under the law, workers' bonuses and benefits that are beyond P30,000 are automatically subject to tax.

This means an employee receiving P40,000 bonus and benefits will have to pay income tax for the excess of P10,000.

But Recto said this should be adjusted to reflect current realities such as inflation and the Consumer Price Index (CPI).

Inflation is the upward movement in the prices of goods and services while CPI measures changes in the price level of consumer goods and services purchased by households.

He said adjusting upward the ceiling would just be fair since the CPI has risen by more than 200 percent since 1994 and also inflation.

"Over the years, Inflation has eroded the purchasing power of our taxpayers and, thus, the ceiling on bonus that is exempt from tax is no longer responsive to actual realities," Recto said during Thursday's hearing of the Senate ways and means committee on the proposed measures.

He stressed the P30,000 ceiling was arrived at when the lowest monthly basic salary for employees with Salary Grade 1 was P2,800 and that of the President of the Philippines with Salary Grade 33 was P25,000.

Currently, after a series of salary adjustments, Salary Grade 1 now receives P8,287 while salary Grade 33 is paid P107,470.

Citing figures presented by the National Economic Development Authority (NEDA), Recto said the P30,000 ceiling is now practically worth P15,000 while the ceiling should be adjusted to as high as P57,000 due to inflation.

Recto is proposing an adjustment to P60,000 to P72,000 in the ceiling while a similar measure filed by Sen. Miriam Defensor-Santiago calls for an increase to P40,000.

He said projected losses from the ceiling adjustment could be off-set by new revenues to be realized with the rationalization of fiscal incentives, adjusting the sin tax rates and even by proceeds from the estimated P120 billion coconut industry investment fund (CIIF) parked in San Miguel Corp. that was recently awarded by the high court in favour of the government.

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