There’s always a number of ways to skin a cat, so to speak. When it comes to increasing the take-home pay of workers and employees, the usual strategy is to increase the amount of basic wage and other benefits. Market forces, as well as the law of supply and demand, cannot be trusted when it comes to minimum wage, the reason why there is an institutional mechanism for mandatory fixing of minimum wage. The oft-cited problem with mandatory wage increase, on the other hand, is the adverse impact on employers, especially the small and medium enterprises, who might not be in the best position to absorb the wage increase. Do not kill the goose the lays the golden egg.
Inflation and price of commodities rise on a constant pace. Wages and salaries cannot match the pace of price increase. So, if it’s counterproductive to constantly compel employers to increase wages, how else to increase the amount of take-home money? Decrease the portion of the wage, salary or other benefits that goes to tax payment.
A proposed law filed with the Senate (Senate Bill 256) seeks the increase of the tax-free ceiling for bonuses, 13th month pay, productivity incentives and similar benefits. The existing cap is P30,000, which simply means that any amount beyond P30,000 is taxable as regular income. Employees will get the full P30,000 tax-free. The proposed law seeks to increase the tax-exempt ceiling from P30,000 to P75,000. A counterpart bill, House Bill No. 3974, has been filed at the lower house.
[Update — Republic Act No. 10653 was signed in February 12, 2015, increasing the exemption from P30,000 to P82,000.]
As explained in the proposed law, the P30,000 ceiling was first introduced in 1994 when the lowest monthly basic salary for government employees was P2,800. That basic salary now stands at P25,000. If the tax-free cap — at the time when the lowest salary was P2,8000 — was P30,000, it’s unrealistic to maintain the same cap when the lowest salary has increased by almost 900%.
The Bureau of Internal Revenue (BIR) has opposed the move because it will shave billions from government coffers — between P10 Billion to P62 Billion annually, according to Finance Secretary Cesar V. Purisima. While it’s understandable for the BIR, with its duty of collecting taxes, to ensure that sources of taxes remain intact, it’s also be understandable for taxpayers — who have witnessed the daily parade of exposes on multi-billion corruption of government money — to expect that government to recognize the logic for the tax-cap increase on benefits. Increasing the tax-exempt ceiling is indeed “one of the reliefs the people need during these hard times.”
It’s still a PROPOSED law so don’t get overly excited. It has to pass the Senate, go to the House of Representatives and, finally, the President. A lot of things can happen and the proposal can simply fade into oblivion. Talk to your lawmakers. Anyone who believes in the proposal’s should speak up. Do something. There are many ways to skin a cat, so to speak.