Race for Aquino’s signature: 13th month pay or lower income tax?

Two things make people excited for Christmas: parties and the 13th month pay.

And this year’s holiday is sure extra merry, as workers are able to take home a month’s worth of salary – tax free – after the President signed Republic Act 10653 or the 13th month pay law.

Enacted on February 12, 2015, the measure raises to P82,000 the amount of bonus that’s exempted from taxes, from the previous 30,000.

A member of the House of Representatives, however, believes that passing the 13th month pay law is a “tactical mistake” on Congress’ part. The source says this in the context of tax reform debates. (READ: DOLE to employers: Give 13th month pay by Dec 24)

If the congressman is to be believed, there was a race between the 13th month pay measure and the proposal for lower income taxes to reach the President’s desk. Had the 13th month pay bill not reached the Office of the President for signature, then lowering income tax rates would have had a chance by year’s end.

Another House source told Rappler that the other representative urged counterparts in the Senate to hold the bill on the 13th month pay exemption to give way to the measure on lowering income taxes.

The lawmaker told colleagues that should the “executive” approve the tax exemption on bonuses, they would not be able to get a “favor” on other measures reducing income tax.

Show off Senate?

Accusing the Senate of showing off, the source said senators dismissed the congressman’s advice and pushed for the 13th month pay exemption when it saw that the measure was taking strides in the House of Representatives.

Senator Juan Edgardo Angara, chairman of the Senate ways and means committee, said “it’s tough to say” whether shelving the 13th month pay bill would have resulted in an easier passage of the income tax reform bill.

“Nauna talaga ‘yung 13th month (13th month pay really did come first), so the way things work in the Constitution, the House has to pass it first. On the part of the Senate, we took what the House passed,” Angara told Rappler in a chance interview.

“We are still waiting on the income tax reform [bill]. We’ll see if there is a change of heart somewhere.”  

Malacañang earlier rejected the proposal to reduce income tax rates, calling income taxes the “lifeblood of the economy.” According to the Department of Finance, reducing income tax would also lead to a P30-billion ($641.49 million) revenue loss. 

While the 13th month pay bill reached the Senate on September 30, 2014, and was eventually be enacted, there are 10 bills on reducing income tax that have been pending before the House committee on ways and means since 2014. (EXPLAINER: Is income tax reform dead?) – Rappler.com