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The implementation of government programs would be affected if Congress passed the law raising the tax-exemption ceiling on employees’ 13th month pay and bonuses to P70,000, Finance Secretary Cesar Purisima said Monday.
Purisima urged lawmakers to adopt a “holistic approach” in passing tax reform measures as the government stands to lose anywhere between P40 billion to P60 billion if House Bill 4970 is approved.
“[If the amount lost is P60 billion], that’s equivalent to our CCT (Conditional Cash Transfer) program.... Our ability to fund the government’s programs would be affected,” he said.
Of the proposed P2.6-trillion national budget for 2015, 7.1 percent or P967.9 billion has been set aside for social services. The Aquino administration’s flagship CCT program is seen to receive P64.7 billion to support 4.4 million beneficiaries.
Should the tax-exemption ceiling on bonuses be raised, Purisima said the Department of Finance should be given the administrative capacity to broaden the tax base and adjust exemptions from the Value Added Tax so the government’s losses would be balanced with gains.
“That’s why if the tax collection is reduced [as a result of the proposal], our suggestion is for us to be given the opportunity to either recover the losses through other taxes or improve our capacity to tax those who aren’t paying taxes,” he said.
HB 4970 seeks to amend Section 32(B)(7)(E) of the National Internal Revenue Code of 1997 by increasing the ceiling for the total exclusion from gross income of employees’ 13th month pay and other benefits from the current P30,000 to P70,000.
The bill was approved on second reading on September 9. It is expected to be approved on third and final reading within this year.
Should the measure be passed into law by the end of 2014, private and government employees will be able to take a larger amount of 13th month pay and bonuses by 2015.
‘Don’t blame us’
Bureau of Internal Revenue Commissioner Kim Henares said the BIR had no means of recovering the revenue it would lose if the tax-exemption ceiling on bonuses is increased.
“If the take-home pay of workers from bonuses is increased, they spend it on items we can’t tax, such as vacations or school tuition fees. Where then can we recover the taxes we’ll lose?” she asked.
Henares warned the Philippine economy might suffer from a credit downgrade if tax exemptions are increased.
“Let’s be prepared for a credit downgrade. If that happens, interest rates will rise, which in turn will lead to an increase of prices of goods,” she said.
While the BIR is ready to implement HB 4970 if it becomes a law, Henares said its effects on the economy should be clear for lawmakers and the public.
“We don’t have problems implementing the law as long as it’s clear what the consequences are. If the effects I mentioned [such as a drop in credit rating] happens, then they shouldn’t blame us. Walang sisihan,” she said. —NB, GMA News