The Significant Implications of Tax Exemptions
House Bill 4970 has been approved in September, which has the goal of being able to increase the tax exemption for 13th month pay and bonuses of employees. Currently, according to what has been mandated by law, only those earning up to 30,000 pesos are exempted. With the current bill, the ceiling is raised to 70,000 pesos.
Although the bill wishing to increase the limit of income to be exempted from paying taxes has not yet been approved at the Senate, many senators, at least 15 of them, have already expressed their support for the bill, noting how it will be beneficial to millions of employees all over the country. Senate President Franklin Drilon assured the public that the review of the current tax rates is a priority for them. Aside from Drilon, others who have supported the bill are Senators Recto, Cayetano, Sotto, Angara, Escudero, Guingona, Villar, Osmena, Poe, Trillanes, Pimentel, Binay, and Ejercito. If it is going to be viewed from a statistical perspective, their number is two more than the minimum requirement for the bill to be passed as a legislation.
BIR Not Happy
While the bill is being positively received by most legislators, the Bureau of Internal Revenue does not seem to be happy with it. The fears are rising from the fact that the commission will lose almost 43 billion in tax revenues by the end of 2017 if the bill passes as a law. According to Commissioner Kim Henares, if tax exemptions are going to push through, the legislators should also find a way to generate additional taxes so that the government will be able to generate the amount of money needed to sustain its operations and the need of the general public.
Leonor M. Briones, former National Treasurer, has also expressed her fear about this bill. According to Briones, rather than increasing the amount that should be free from tax, there should be more tax breaks that will benefit those who are low-income earners, not just in terms of their bonuses and 13th month pay.
Different Versions of Tax Exemption Bills
Because of the differing perspectives with regards to the taxation policies, a variety of versions have been proposed by several lawmakers. These bills go beyond the exemption of taxes for bonuses and 13th month pay, but also regular and even corporate income. Under the proposal of Miro Quimbo, it is proposed that the corporate income tax is going to be reduced to 25% from the current 30%.
Meanwhile, in the Senate, Recto proposed that no tax will be imposed on people who have a monthly earning of below 20,000 pesos, while those who are earning 60,000 and below will have to be taxed at 10%, 15% for 60,000 to 140,000, 20% for 140,000 to 280,000, 25% for 280,000 to 500,000, and 30% for 500,000 to 1,000,000. Under Aquino’s bill, on the other hand, those earning 60,000 and below will be exempted from paying taxes. Lastly, in the version of Angara, the individual income tax rate will be minimized to 25% from 32%, which is planned to take effect by 2017.