Bill hiking tax exemption cap on bonuses awaits PNoy's signature

By RG Cruz, ABS-CBN News

Posted at Dec 01 2014 05:58 PM | Updated as of Dec 02 2014 04:51 PM

MANILA (UPDATE) – Only President Aquino's signature is needed before salaried workers can benefit from a bill increasing the tax exemptions of 13th month pay and other bonuses from the current P30,000 to P82,000.

The House of Representatives formally adopted the Senate Bill 2437 as a substitute bill to its own version of the measure.

This now paves the way for the quick enactment of the law, dispensing with the need to reconcile the House and Senate versions of the bill.

House majority leader Neptali Gonzales II concedes the law won't be implemented this year.

Earlier in the session, Gonzales moved to adopt the Senate bill as the substitute bill of the House.

SB 2437 had included a provision “that the adjustment be made mandatorily every three years to coincide with major surveys conducted by the Philippine Statistics Authority such as the Family and Income Expenditure Survey.”

Bureau of Internal Revenue (BIR) Commissioner Kim Henares has estimated that tax revenue loss due to the impact of the higher tax exemptions would be at P30.6 billion.

"They still have to transmit it to the President and then it still has to be published and only 15 days after will it become effective, if ever," said Henares.

Senate President Pro Tempore Ralph Recto had said that a more reasonable computation of tax loss was estimated by the Philippine Institute for Development Studies at P2.6 billion and Dr. Stella Quimbo of the University of the Philippines School of Economics at P5.6 billion.

“But whatever is the revenue loss for the government is actually income gained for the workingman. And even if his 13th month pay is tax exempt upon receipt, it will be taxable when spent,” Recto said, adding that taxes not withheld at source will later be captured in the form of sales tax at points of sales.

Senate President Franklin Drilon had introduced an amendment to the bill stating that “the failure of the Secretary of Finance to promulgate the necessary rules and regulations shall not prevent the effectivity of the law.”

“This is because it is up to the Department of Finance and the Bureau of Internal Revenue to come up with the implementing rules and regulations when this law is passed, and they may not have enough time to accomplish that in time. But surely, the law will be fully implemented next year,” the Senate leader noted.

IMPACT: PROS AND CONS

Previously, Finance Secretary Cesar Purisima said the government may lose as much as P60 billion in potential revenues once Congress passes a new law imposing a higher tax exemption for bonuses.

Purisima said this may affect the delivery of government services.

"Estimate between P40 to P60 billion, equivalent to CCT... Not necessarily CCT ang mababawasan but the ability to fund programs of government. Pag binawasan, suggestion bigyan pagkakataon bawiin sa ibang taxes or improve capacity ma-tax ang di nagbabayad ng tax," he said.

Lawmakers believe revenue loss will be offset by an increase in corporate income tax, VAT and indirect taxes because people will buy and spend more.

House ways and means committee chair Miro Quimbo, meanwhile, said taxpayers will feel the benefit of the bill by middle of next year.

Quimbo said the House decided to adopt the Senate version of the measure to forego any further debates.

He added that one reason it wasn’t implemented this year was because many of the employees have already received their bonuses and ordering a refund may be too complicated.

The lawmaker estimates some P1.4 million Filipinos will benefit from the new measure. He also said he sees no reason for President Aquino to veto the bill.