EIGHTEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES )
First Regular Session )
HOUSE OF REPRESENTATIVES
H.No, 4370

Introduced by Representative Vilma Santos-Recto
6th District of Batangas

AN ACT
EXCLUDING THE PERFORMANCE-BASED BONUS FROM THE
COMPUTATION OF TAXABLE INCOME AMENDING FOR THIS PURPOSE
SECTION 32 (B) (7) OF THE NATIONAL INTERNAL REVENUE CODE OF 1997,
AS AMENDED

EXPLANATORY NOTE

Government is a machine whose parts should move in unison towards the attainment
of its strategic goals as reflected in its development plans. This machinery is judged by the
people through its outputs in terms of delivery of goods and services. However, the best-
crafted strategic development plans will be for naught if civil servants who will implement

these are not inspired and committed to achieve the plans.

To systematize monitoring, government evaluates the performance of its agencies as
embodied in three monitoring tools: (1) the Organizational Performance Indicator Framework
(OPIF) by the Department of Budget and Management (DBM); (2) the Strategic Performance
Management System (SPMS) of the Civil Service Commission (CSC); and (3) the Results-
Based Performance Monitoring System (RBPMS) as provided by Executive Order No. 80
issued on July 20, 2012.

Recognizing that the performance of each agency is the result of the service rendered
by employees, the government deemed it necessary to reward exemplary work through
Executive Order No. 80, Directing the Adoption of a Performance-Based Incentive System
for Government Employees. It provided for the grant of the Performance-Based Bonus (PBB)
on top of the Productivity Enhancement Incentive (PEI). While the PEI is granted to all
government employees across-the-board at the uniform rate of Five Thousand Pesos
(P5,000.00) each, the PBB depends on the rating that the agency received and the employee's


performance rating.

With the issuance of Executive Order No. 201 on February 19, 2016, the existing
PBB granted to qualified government personnel, including those in local government units
(LGUs), is enhanced to strengthen its results orientation, to be given in an amount equivalent
to one (1) month basic salary up to two (2) months basic salary, to be implemented in two (2)
phases starting in FY 2017. The PBB shall be subject to the achievement by departments or

agencies, including LGUs and individual employees of their performance targets or
commitments and compliance with good governance and other conditions. The grant of the
enhanced PBB shall be based on a progressive rate system. As the position and responsibility

in improving agency performance becomes higher, so is the amount of PBB granted.

As formulated, the PBB should be an effective reward for exemplary work. However,
under the Tax Code, it shall be subject to income tax, thereby reducing its monetary value. To
grant government employees full recognition and enjoyment of their reward for exemplary
performance, this proposed measure seeks to exclude the PBB granted to qualified
government personnel from the computation of taxable income by amending for the purpose
Section 32 (B) (7) of the National Internal Revenue Code of 1997, as amended.

‘The PBB must be granted in its full amount and should not be subjected to income tax
to serve as a meaningful reward for employees who walked the extra mile towards the
attainment of agency goals and, on the other hand, as a motivational tool for agencies and

employees rated “Poor” to improve their performance.

Hence, immediate passage of this bill is earnestly

VILMA SANTOS-RECTO


EIGHTEENTH CONGRESS OF THE. )

REPUBLIC OF THE PHILIPPINES )
First Regular Session )
HOUSE OF REPRESENTATIVES
HLNo. 4370

Introduced by Representative Vilma Santos-Recto
6th District of Batangas

AN ACT
EXCLUDING THE PERFORMANCE-BASED BONUS FROM THE
COMPUTATION OF TAXABLE INCOME AMENDING FOR THE PURPOSE
SECTION 32 (B) (7) OF THE NATIONAL INTERNAL REVENUE CODE OF 1997,
AS AMENDED

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:
Section 1. Section 32 (B) (7) of the National Internal Revenue Code of 1997, as

amended, is hereby further amended to read as follows:

“Sec. 32. Gross Income. —

“(A) General Definition. ~x x x

“(B) Exclusions from Gross Income. —xx x

“UYXxx

“Q)xxx

“B)XXX

(4) xxx

“() xxx

“© xxx

(7) Miscellaneous items. —

“(@)xxx

“(b) xxx

“(Xxx

“(xxx

“(@)xxx

“(F) PERFORMANCE-BASED BONUS (PBB) GRANTED TO

QUALIFIED GOVERNMENT PERSONNEL;


“TAG xxx
“ [1 (A) xxx
“1491 xxx.”

Sec. 2. Implementing Rules and Regulations. — Within thirty (30) days from the
effectivity of this Act, the Department of Finance (DOF), Department of Budget and
Management (DBM), and the Civil Service Commission (CSC), shall promulgate the
necessary implementing rules and regulations for its effective implementation.

Sec. 3. Repealing Clause. ~ All other laws, decrees, orders, issuances and rules and
regulations or parts thereof inconsistent with this Act are hereby amended or repealed
accordingly.

Sec. 4. Effectivity. ~ This Act shall take effect fifteen (15) days after its publication
either in the Official Gazette or in at least two (2) newspapers of general circulation.

Approved,