13th month pay may be slapped with tax under reform push


Posted at Sep 28 2016 12:44 PM | Updated as of Sep 28 2016 04:42 PM

MANILA (2nd UPDATE) - A draft of President Rodrigo Duterte's tax reform program that was submitted to Congress seeks the lifting of tax exemption on workers' 13th month pay.

The tax on the 13th month pay, however, would still be smaller compared to the total tax exemptions of those earning under P250,000 annually, said Quirino Rep. Dax Cua, chairman of the House Ways and Means Committee.

"Pinagaaralan namin ngayong kung doable [We are studying if it is doable]," Speaker Pantaleon Alvarez said.

Congress plans to pass the entire tax reform package next year at the earliest, said Cua.

Under the proposal, tax exemptions will remain for contributions to the Government Service Insurance System, the Social Security System and the Pag-ibig housing fund, union dues, gains from the sale of bonds and debt instruments, and gains from the redemption of shares in a mutual fund.

The draft proposal seeks to gradually increase tax rates to up to 35 percent for those earning above P5 million annually over two years from 2018 to 2019.

After 2019, the taxable income levels will be reviewed every five years, according to the draft.

Duterte's economic team is seeking to lower income tax rates for middle income earners to 25 percent from 32 percent to make the country more competitive compared to its Southeast Asian peers.

To offset lower income taxes, Duterte is pushing for the removal of value added tax exemptions.

Duterte also plans to impose excise tax on fuel and remove VAT exemptions of senior citizens for luxuries such as travel and restaurant meals while keeping exemptions on medicine, education and raw food.

Removing some tax exemptions for senior citizens will defeat the purpose of the Centenarian Act of 2016, which addresses the concerns of the country's elderly population, said Albay Rep. Edcel Lagman.

Northern Samar Rep. Raul Daza agreed, saying seniors should be respected and should not be discriminated against.

Buhay partylist Rep. Lito Atienza also slammed the proposal to remove VAT exemptions for senior citizens.

"Ang aalisin sa senior 'yung exemption from VAT, which is 12 percent. I cannot agree with that. It's not a tax reform proposal, it's a cover up, we're not looking at Customs, we're not looking at the BIR. Diyan dapat manggaling ang perang kailangan," he said. -- reports from RG Cruz, ABS-CBN News