Supreme Court rules: Gov’t workers allowances shall be taxed

Lian Buan

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Supreme Court rules: Gov’t workers allowances shall be taxed

LeAnne Jazul

The High Court, in effect, says all income – even allowances, bonuses and incentives – are subject to tax

MANILA, Philippines – The Supreme Court (SC) has ruled that all income received by government employees, including allowances, bonuses and incentives, shall be taxed.

“The Court directed that this Decision be applied prospectively,” the SC said in an announcement on Wednesday, July 4.

The High Court ruled on the petition filed in 2014 by the Confederation for Unity, Recognition and Advancement of Government Employees or Courage.

The petition questioned the legality of former Tax Commissioner Kim Henares’ Revenue Memorandum Order (RMO) No. 23-2014.

The SC said that the memorandum order did not impose additional taxes because it “merely mirrored the relevant provisions of the National Internal Revenue Code (NIRC) of 1997 on withholding tax on compensation income.

Government workers who insist that their allowances and bonuses should be exempt from tax have “the burden to prove the factual and legal bases of the claim in the proper administrative and judicial proceedings,” said the SC. 

“Specifically, the Court also stated that the fiscal autonomy enjoyed by the Judiciary, Ombudsman, and Constitutional Commissions does not grant immunity or exemption from the common burden of paying taxes imposed by law,” the announcement said.

However, the SC nullified the part of Section VI of the memorandum order where it requires governors, mayors, barangay captains and heads of government agencies and government-owned or controlled corporations (GOCCs) to withhold and remit taxes.

The SC said the provision is not found on the tax code.

“In imposing upon these officials an obligation not found in law or in Implementing Rules, the Commissioner of Internal Revenue did not merely issue an interpretative rule designed to provide guidelines for enforcement of the law but supplanted details—a power vested by law only on the Secretary of Finance,” the SC said. –

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Lian Buan

Lian Buan is a senior investigative reporter, and minder of Rappler's justice, human rights and crime cluster.