Press Release
April 28, 2013

As DOLE rules out wage hike order
Tax-exempt bonuses & OT pay pushed for Labor Day

Sen. Ralph G. Recto today reiterated his proposal to tax -exempt Christmas and 13th month bonuses and overtime pay of private and government workers that would effectively bring down income taxes and make it as part of government's Labor Day surprise for May 1.

"I really don't expect them to announce a wage increase on Labor Day or sooner. I hope my proposal will make up for the lack of wage hike order this coming May 1 celebrations," Recto, senior member of the Senate committee on labor, employment and human resources development, said.

He added: "If the working Juan de La Cruz can't expect a raft of wage-related benefits on his special day, exempting their bonuses and overtime pay from taxes would be a welcome relief."

True enough, the labor department has announced that workers won't be receiving any wage increase on May 1.

But Labor Secretary Rosalinda Baldoz said some non-wage benefits package may be unveiled during Labor Day by President Aquino, including tax exemption to workers.

Recto stressed his proposal to tax-exempt Christmas and other bonuses could be integrated to the non-wage benefits that the Palace may have in mind.

He said the tax-exemption could be announced as part of government's Labor Day package for all workers.

The senator is also proposing that employees who are earning P300,000 and below per annum should be exempted from income tax.

Currently, only minimum wage earners are tax-exempt.

According to his proposal, Christmas and 13th month bonuses amounting to P60,000 and below should be free from tax as against the current ceiling of P30,000.

Presently, 13th month pay and Christmas bonuses that exceed P30,000 are subject to income tax.

Such proposal is contained in Recto's Senate Bill 2879, which has already reached the committee level in the Senate.

Recto has argued that the P30,000 tax-free ceiling on 13th month and Christmas bonuses is obsolete.

He said the ceiling had not been adjusted for the last 18 years or since 1994 when the lowest monthly salary of a government worker was only P2,800 and that of the President of the Philippines was at P25,000.

"Now the monthly salary of a basic state worker as of June 2012 is P9,000 while the pay scale of the President is P120,000 but the ceiling of P30,000 has remained unchanged," the senator said.

Overtime pay of workers for serving in excess of their regular time load should also not be taxed, according to Recto, who is chair of the Senate committee on ways and means.

"We should not punish a worker's hard work and dedication with a tax," he stressed.

Recto said the government need not wait for a new legislation to implement his proposal since the Department of Finance and the Bureau of Internal Revenue (BIR) are empowered under the Tax Code to adjust the ceiling of P30,000, but have not exercised it.

The senator said while there would be initial revenue losses, the proposal would become "revenue neutral" in the medium-term as money saved from the tax-exemptions are plowed back into the economy through increased spending.

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