SEVENTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES )
First Regular Session 
)
S. No.
SENATE
832
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'16 JUL 21 
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Introduced by Senator Ralph G. Recto
AN ACT
EXCLUDING THE PERFORMANCE-BASED BONUS FROM THE COMPUTATION 
OF TAXABLE INCOME AMENDING FOR THIS PURPOSE SECTION 32 (B) (7) OF 
REPUBLIC ACT NO. 8424, OTHERWISE KNOWN AS 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 embodied in its various development plans. This machinery is judged by the 
people tlirough its outputs or its delivery of goods and services. However, the best-crafted 
strategies and development plans will be unattainable if civil servants are not well compensated.
To systematize monitoring, government evaluates the perfonnance of its agencies as 
embodied in three monitoring tools: the Organizational Performance Indicator Framework 
(OPIF) by the Department of Budget and Management (DBM), the Strategic Perfonnance 
Management System (SPMS) of the Civil Service Commission (CSC) and the Results-Based 
Performance Monitoring System (RBPMS) as provided by Executive Order No. 80 issued on 
July 20, 2012.
Recognizing that the perfonnance 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 Perfonnance-Based Incentive System for Government 
Employees. It provided for the grant of the Perfonnance-Based Bonus (PBB) on top of the 
Productivity Enhancement Incentive (PEI). Wlhle 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 perfonnance rating.
With the issuance of Executive Order No. 201 on February 19, 2016, the existing PBB 
granted to qualified govennnent personnel, including those in LGUs, shall be 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 perfonnance 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 perfonnance 
becomes higher, so is the amount of PBB.
As fonnulated, the PBB should be an effective reward for exemplary work. However, 
under the Tax Code, it shall be subject to income tax thereby making the reward deceptive. 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 
persomiel from the computation of taxable income by amending for the purpose Section 32 (B) 
(7) of Republic Act No. 8424, otherwise known as the “National Internal Revenue Code of 
1997”, as amended.