A proposal is currently pending in the Senate to increase the tax exemption of 13th month pay, Christmas bonuses, productivity incentives and similar benefits — from the original maximum tax-free amount of P30,000 to P75,000. The proposal also provides for an adjust of the cap every three years, to raise the maximum exemption to its present value using the consumer price index. Under existing laws, any amount beyond P30,000 is subject to income tax.
The proposal is contained in Senate Bill No. 256 (full text), filed by Senator Ralph G. Recto. In the explanatory note, Senator Recto noted that the amount of P30,000 no longer mirrors the prevailing circumstances. When the P30,000 ceiling was first introduced in 1994, the lowest monthly basic salary for government employees was P2,800 (now at P9,000), while the salary of the President of the Philippines was P25,000. The salary rank equivalent to the President now gets P120,000. While there have been increases in the legislated salaries, the tax-exempt cap remained the same.
The law, according to Senator Recto, “should always be responsive to the needs of the people. An increase in the ceiling of the 13th Month Pay and other benefits to be exempted from income tax is one of the reliefs the people need during these hard times.”
This is definitely good news for salary/wage earners, but bad news for the Bureau of Internal Revenue. Do you agree with this proposed law increasing the exemption ceiling? [Use the comment section below.]