Christmas card to consumers: Raise tax exemption on 13th month pay

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Christmas card to consumers: Raise tax exemption on 13th month pay


Full text of Senate President Pro-Tempore Ralph Recto's co-sponsorship speech on the bill seeking to raise to P75,000 the amount of 13th month pay that is exempted from taxes

MANILA, Philippines – This is the full text of Senate President Pro-Tempore Ralph Recto’s co-sponsorship speech on Senate Bill 2437 under Committee Report 84, delivered on Wednesday, October 22. The bill seeks to raise to P75,000 the amount of 13th month pay that is exempted from taxes, from the current P30,000. This has been welcomed by workers – and has support in the House of Representatives as well – but opposed by the Bureau of Internal Revenue.

Recto outlines how the higher tax exemption is imperative, and urgent, and debunks the tax collector’s arguments against it.


No tax law is chiseled in stone. Revenue laws get amended or changed overtime.

Economic developments trigger revisions in our tax code. So does technological advancement.

For tax laws to be relevant, they must respond to, not resist, the changing social landscape. 

The only two constants are that citizens obey them. And for lawmakers whom they elected, to change these laws when these become obsolete.

Because if our tax code were a fossilized document, then we would still be collecting taxes on opium.

A hundred years ago, an opium addict, upon paying the Commissioner of Internal Revenue a fee as little as one peso, could secure a license, issued in quadruplicate, allowing him to smoke, chew, swallow or inject opium.

In 1914, there was also a specific tax on matches. Our first internal revenue code, Act 1189, written under American tutelage, slapped a tax of 40 centavos per 120 sticks.

It was also when carabaos were still taxed. So when an addict went to an opium den for his regular fix, then he paid a tax on his drug, on the match he used for lighting the pipe, and, if he was chauffeured there in a carabao-drawn carromata, on his ride.

Looking back, we may dismiss those levies as novelties. Today the mere thought of a tax on a match is already incendiary. But at that time, those who wrote those laws saw wisdom in them and the common good they serve.

It is the same wisdom that led subsequent legislatures to prune our thicket of revenue laws of dead parts.

The Senate, for one, is a huge paper-shredder of antiquated tax laws – and even tax proposals.

Always it has followed the “elevator rule” in taxation. Rates can go up – or down.  The power to tax is not exclusive to raising tax rates; it includes lowering them, not just to impose taxes on goods and income, but to exempt certain ones.

And if taxation is compulsion, then compassion lies in the exceptions to the rule.

Exemptions and deductions are what distinguish taxation from taxidermy.

Taxation is the art of plucking the most amount of feathers from the goose with the least hissing. Taxidermy leaves only the skin.

In 1994, those in this chamber – Senator Tito [Sotto] is a member of Class ’92 –  pondered long and hard on how much of the 13th month pay and other bonuses should be kept outside the reach of the taxman.

Republic Act 7833, which they passed that year, placed P30,000 as the no-tax zone. Ibig sabihin, lahat ng ito p’wedeng iregalo sa inaanak. Ano mang lampas, may kaltas na ang BIR.

We combed through the debate records to learn how they arrived at that figure. We found out that there were no esoteric econometric models behind the amount.

The raison d’ etre was simple: Because the salary of the President then was P25,000 a month, then P30,000 was presumed to be enough to cover all civil servants.

The buffer of P5,000 was installed in the event that the public sector pay would be increased.

In fact, in anticipation of this, the 10th Congress included a provision in RA 8424 which states that the Secretary of Finance may raise the threshold.

As we all know, in legal construction, there is a whale of a difference between “shall” and “may.” The former is mandatory, the latter optional. Often, the synonym of “may” is “never.”

When it came to the P30,000 threshold, the provision to raise it based on inflation was never invoked. 

Who would have thought that the DoF would love the word “may” when “shall” is a favorite word in the BIR vocabulary as its demand letters are peppered by “shall pay,” “shall remit,”  “shall comply”?

For its inaction, we are stuck with a threshold, carbon-dated to one generation, 20 years, and 3 presidents ago.

The peso has lost two-thirds of its value over the past 20 years. One peso in 1994 is worth 36 centavos today.

Adjusted to inflation, the P30,000 then should be P82,300 today.

But instead of retracing the Consumer Price Index back to the era when the Senate was still squatting in the National Museum, when express mail to senators was called telegram, when they were summoned to meetings through SMS in their pagers, it would be better to recite grocery receipts than to show how much the peso has lost value.

When the 17-year-old Bam Aquino sipped his first beer in 1994, Pale Pilsen cost P8.50 a bottle. If he rode a jeepney from Katipunan to the Cubao beer garden, he paid P1.50. 

Of course, Sonny Angara, on vacation from his London studies, wouldn’t be caught taking public transpo. If he borrowed one of his dad’s cars, he would have paid P8.50 for a liter of gasoline.

When the other Sonny was an Upperclassman in PMA, a kilo of rice in the Baguio market was P13, bread at Star Cafe can be had at P7 a loaf.

When Alan was a first-term 23-year-old councilor in Taguig his lakeshore constituents were selling tilapia at P64 a kilo, bangus at P69, and duck eggs at P2.70 each.

At kung nag-go-grocery si Nancy sa Cash and Carry noon, ang kilo ng baboy ay P86, ang isang litro ng mantika ay P25, ang kalahating kilo ng oatmeal ay P55, isang kilo ng longganisa ay P85, ang kilo ng mangga ay P34, at ang sardinas ay P6 isang lata.

Sa Batangas, naalala ko pa na 20 years ago, pwede kang bumarik ng gin na may kasamang isang platitong mani sa halagang P10.

Ito ‘yung presyo ng mga bilihin sa panahong itinakda na P30,000 ang 13th month pay at iba pang benepisyong di na bubuwisan. Ang trenta mil noon, P10,800 na lang ang halaga ngayon.

May ilang nababala na P42 billion daw ang malulugi sa pamahalaan kung maipapasa ang panukalang batas na ito na naglalayong itaas sa P75,000 ang 13th month pay na di na bubuwisan.

Wala pong basehan ang ganung pangamba. Una, ang binayad na income tax sa buong Pilipinas noon 2013 ay P214 bilyon.

Kung paniniwalaan natin ang ganung haka-haka, ibig sabihin po ba na one-fifth ng suweldo o kita ng mga taxpayers sa bansang ito ay galing sa 13th month pay at Christmas bonus or ‘binibigay kung malapit na ang Pasko? Mahirap naman yatang paniwalaan ‘yon.  

Sapagkat numero ang pinagbabasehan sa pagbubuwis, mas kapanipaniwala siguro ang estimate ng foregone revenues na ‘binigay ng PIDS at ni Dr Stella Quimbo ng UP School of Economics.

Tinataya ng PIDS na P2.6 bilyon lamang ang kabawasan sa taunang koleksyon, at ayon naman sa komputasyon ni Dr. Quimbo – na hindi basta namitas ng numero sa ere at sa halip ay ipinakita ang kanyang formula – sagad na ang P5.6 bilyon bilang revenue loss.

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, so tax not withheld at source will later be captured in the form of sales tax at points of sale.

This is the season of rising prices of commodities.  

‘Yung pork pata na p’wedeng pang-Noche Buena na P63 a kilo noong 1994 ay P170 na ngayon. ‘Yung bigas na tig-trese pesos noon, P42 na ngayon.

We can’t pass a law prohibiting food inflation as much as we can’t repeal the law of supply and demand.

Lower price tags can’t be legislated.  

But there’s something else we can do to ease the plight of our consumers, and perhaps add a little cheer to their Christmas, and that is to pass this law.

In its enrolled form, this bill can be our Christmas card to them. – 


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