Bill increasing 13th month pay tax exemption hurdles second reading in Senate

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MANILA – A bill increasing the tax exemption ceiling on the 13th month pay and other benefits from the current PhP30,000 to PhP75,000 has hurdled the second reading in the Senate.

Unlike the original proposal under Senate Bill No. 2437, the Senate approved Tuesday night the amendment introduced by co-author Senate President Pro-Tempore Ralph Recto who raised the tax exemption cap further to PhP82,000.

Senator Juan Edgardo ‘Sonny’ Angara, the sponsor of the bill and chair of the Ways and Means committee, has accepted the amendment of Recto.

“I welcome the amendment of Senator Recto, the resident tax expert of the chamber. He is correct in saying that if we are to follow the logic of the proposal, we must use the correct figure consistent with the inflation rate,” Angara said.

“In fact, the same figure was given by BIR Commissioner Kim Henares in one of the hearings when she said that PhP30,000 in 1994 would be worth around PhP82,000 today,” Angara said.

Recto noted that the figure came from the National Economic and Development Authority using the inflation rate as of October this year.

Currently, Republic Act No. 7833, which was enacted in 1994, mandates that the 13th month pay and other benefits, such as productivity incentives and Christmas bonuses, not exceeding PhP30,000 given to both government and private sector employees are exempted from tax.

”In order for this injustice not to happen again because we left our system unchanged and outdated, our proposed measure mandates that adjustments be made every three years after the effectivity of this law, taking into account inflation,” Angara said.

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

Meanwhile, if this bill is finally passed into law, the Department of Finance projected the revenue loss at over PhP30 billion, but this was deemed a bloated figure by various experts, who served as resource persons during committee hearings, who estimated the revenue impact to be in the range of PhP3 billion only.

The measure is expected to benefit approximately half a million employees.

All senators were made co-authors of SB 2437, which is a consolidation of bills authored by Senators Angara, Recto and Lito Lapid.

While the Senate is committed to pass it on third and final reading anytime next week, Drilon expressed doubts whether the proposal will be implemented this year due to time constraint.

”We tried to finish it for December but we ran out of time.

Perhaps not this year because we need the implementing rules and regulation of the Bureau of Internal Revenue and Department of Finance,” Drilon said in an interview on Wednesday.

Drilon, however, assured that a lot of employees, specifically from the government, will benefit from the proposed law.