Congress to raise 13th month pay tax exemption cap

Drilon says Congress will prioritize a bill raising the tax exemption cap on the 13th month pay to P75,000 from P30,000

'PRO-CONSUMER BILL.' Senate President Pro-Tempore Ralph Recto and Senate President Franklin Drilon back a bill that raises the tax exemption ceiling on 13th month pay from P30,000 to P75,000. File photo by Cesar Tomambo/Senate PRIB

MANILA, Philippines – Will private and government employees soon have a higher take-home pay during the Christmas season? 

The answer depends on whether or not Congress will make good on its promise to prioritize a bill raising the tax exemption ceiling on the 13th month pay, Christmas bonus and other benefits. 

Senate President Franklin Drilon said congressional leaders agreed to give “urgent legislative attention” to the bill raising the cap from P30,000 to P75,000.

Current laws exempt the mandated 13th month pay, Christmas bonus and other benefits from the coverage of income taxes but only up to P30,000. Any amount higher is considered part of an employee’s gross income and is subject to tax.

Senate Bill No 256 authored by Senate President Pro-Tempore Ralph Recto aims to raise the cap to P75,000 by amending laws that set the limit 20 years ago.

“The law was passed 20 years ago, and obviously, things have greatly changed – making such figures no longer reflective of current economic realities, thus making it even more difficult for the average Filipino worker to make both ends meet for him and his family,” Drilon said in a statement on Tuesday, February 18.

In his bill, Recto said that when the original tax exemption law was passed in 1994, the lowest monthly basic salary for government employees was P2,800 while the salary of the President of the Philippines was P25,000.

Now, the basic salary stands at P9,000 and the president’s salary is P120,000. 

Citing estimates of the National Tax Research Center and the National Economic and Development Authority, the former socioeconomic planning secretary said the tax exemption ceiling as of 2011 should be P75,000 if adjusted for inflation.

Recto’s bill provides that the new P75,000 ceiling be adjusted to the present value using the consumer price index, as published by the National Statistics Office 3 years after the measure is signed into law, and every 3 years after.

Drilon said, “While most of the priority bills right now focus on macroeconomic progress, we have to make sure that necessary bills such as SBN 256 will also receive the required resources and attention towards their passage, for the sake of our countrymen.”

‘Tax exemptions will hurt economy’

A staunch administration ally, Drilon backed the bill even after Bureau of Internal Revenue Commissioner Kim Henares told the Senate that more tax exemptions will hurt the economy without any new compensatory taxes.

In a hearing of the Senate ways and means committee last December, Henares expressed the position of the Department of Finance that the government is on deficit-spending and has to deal with the P130 billion cost of rehabilitating provinces ravaged by Super Typhoon Yolanda (Haiyan) in the Visayas.

“I’m going to play the bad guy in this committee hearing. Because my general policy is that as of now, we’re still on a deficit. So if you look at it from an ordinary household, we’re still borrowing to live.  If we look at prudence, you do not eat away funds unless you are already at ahead a bit,” Henares said.

The tax chief recommended that Congress also pass new tax measures to compensate for the loss in revenues resulting from the passage of tax-exemption measures.

Other tax measures pending before the Senate include:

  • Bill seeking to exclude overtime pay from the computation of taxable income
  • Bill excluding the 13th month pay from the computation of taxable income
  • Bill amending the National Internal Revenue Code, specifically the cap on the amount of 13th month pay and other benefits
  • Bill excluding performance-based bonus from computation of taxable income
  • Additional Relief to Families Act
  • Tax deductions to parents and legal guardians of children with special needs.
  • People’s Fund Act
  • Family Care Act 


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