Press Release
November 19, 2014

SENATE OKS BILL INCREASING 13TH MONTH PAY EXEMPTION

The Senate on Tuesday has approved on second reading the bill that seeks to raise the take-home pay of Filipino workers by increasing the tax exemption cap for 13th month pay and other benefits from the current P30,000 to P82,000.

The original proposal, Senate Bill 2437, aims to increase the ceiling to P75,000, but Senator Sonny Angara, the sponsor of the bill and chair of the ways and means committee, has accepted the amendment by Senator Ralph Recto to raise it to P82,000.

"I welcome the amendment of Sen. Recto, the resident tax expert of the chamber. He is correct in saying that if we are to follow the logic of the proposal, we must use the correct figure consistent with the inflation rate.

"In fact, the same figure was given by BIR Commissioner Kim Henares in one of the hearings when she said that P30,000 in 1994 would be worth around P82,000 today," Angara said.

Recto noted that the figure came from the National Economic Development Authority using the inflation rate as of October this year.

Currently, Republic Act 7833, which was enacted in 1994, mandates that the 13th month pay and other benefits, such as productivity incentives and Christmas bonuses, not exceeding P30,000 given to both government and private sector employees are exempted from tax.

"In order for this injustice not to happen again because we left our system unchanged and outdated, our proposed measure mandates that adjustments be made every three years after the effectivity of this law, taking into account inflation," Angara said.

Senate President Franklin Drilon further added an amendment to the bill stating, "the failure of the Secretary of Finance to promulgate the necessary rules and regulations shall not prevent the effectivity of the law."

Meanwhile, if this bill is passed into law, the Department of Finance projected the revenue loss at over P30 billion, but this was deemed a bloated figure by various experts, who served as resource persons during committee hearings, who estimated the revenue impact to be in the range of P3 billion only.

The measure is expected to benefit approximately half a million employees.

All senators were made co-authors of SB 2437, which is a consolidation of bills authored by Sens. Angara, Recto and Lito Lapid.

"Given that all of our colleagues in the Senate expressed their willingness to be co-authors of the bill, it clearly indicates that we all want our deserving taxpayers to benefit more from the fruits of their labor--a wonderful Christmas present to our hardworking Filipino workers and their families," Angara said.

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