Gov’t workers ask SC to reconsider verdict on taxing allowances

The organization of government workers that challenged internal revenue guidelines has asked the Supreme Court (SC) to reconsider a decision that upheld rules that subject their allowances and bonuses to tax.

The Confederation of Unity, Recognition and Advancement of Government Employees (COURAGE) on Wednesday said it has filed a motion for reconsideration of the SC's ruling that "all income" from an employee's employer are "presumptively taxable and subjected to withholding."

"We are already reeling from the effect of high prices caused by the TRAIN Law, oil price increase and the peso depreciation, and now this reduction on our 'take-home pay' which is not even enough to take us home will further aggravate our situation," Ferdinand Gaite, COURAGE national president, said in a statement.

The SC must rule that the BIR, through Memorandum Order 23-2014, erred "in including all fringe benefits as taxable," SC Employees Association president Erwin Ocson said.

COURAGE is an umbrella organization of workers' unions from the SC, the Senate, the National Food Authority, the National Housing Authority, the Department of Agrarian Reform, the Metro Manila Development Authority, the Department of Social Welfare and Development, and others.

In July, the SC voted unanimously to uphold sections III, IV, and VII of the said memorandum, a directive on the obligations of state agencies, bureaus and instrumentalities as tax withholding agents.

Section III constitutes government offices as withholding agents of creditable tax required to be withheld from government employees; Section IV lists the income types that are not subject to tax; and Section VII lists the penalties in case of non-compliance.

Section III says some forms of taxable compensation include, among many others, efficiency incentive benefits for legislative branch workers, additional compensation for SC workers, and performance-based bonus for executive branch workers.

In upholding these sections' validity, the SC held that "no additional tax is imposed as the two sections merely mirror the relevant provisions of the National Internal Revenue Code of 1997 on compensation income."

But the SC struck down Section VI of the memo "only where it names the Governor, City Mayor, Municipal Mayor, Barangay Captain, and Heads of Office in government agencies, government-owned or controlled corporations, and other government offices, as persons required to withhold and remit withholding taxes."

It said the commissioner of internal revenue acted with grave abuse of discretion in issuing the said provision.

The decision was reached four years after COURAGE filed a petition that challenged the memorandum, arguing that allowances, bonuses, and other compensation for government workers were non-taxable fringe and "de minimis" or small value benefits. — BM, GMA News