SIXTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
) 
'13 
hUG -6 Al0!10 
SENATE 
S.No. 1213 
Introduced by Senator Ralph G. Recto 
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 through 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 performance of its agencies as 
embodied in three monitoring tools: the Organizational Performance Indicator Framework 
(OPIF) by the Department of Budget and Management, the Strategic Performance Management 
System of the Civil Service Commission and the Results-Based Performance Monitoring System 
as provided by Executive Order No. 80. 
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 (PEl). While the PEl 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. 
Both Employee and agency are rated Best, Better, Good or Poor.! The rates of the PBB 
were distributed as follows for FY 2012, "without prejudice to the revision thereof in succeeding 
years". Thus: 
Bureau 1 Unit Best (Top 10%) 
Better 
(Next Good 
(Up 
to Poor 
Ranking 
25%) 
65%) 
BestITop 10%) 
P35,000.00 
P20,000.00 
PIO,OOO.OO 
Belter 
«(Next P25,000.00 
P13,500.00 
P7,000.00 
25%) 
Good 
(Up 
to PI5,000.00 
PIO,OOO.OO 
P5,000.00 
65%) 
Poor 
As formulated, the PBB should be an effective reward for exemplary work. However, the 
current practice of subjecting it to income tax makes the reward deceptive. To grant government 
employees full recognition and enjoyment of their exemplary performance, this Bill proposes to 
include the PBB among the types of compensation exempt 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. 
'! http://www.gov.phl2012/07/20/executive-order-no-80-s-201 21 (Accessed on August 5, 2013) 


As a meaningful reward for employees who walked the extra mile towards the agency 
goals and as a motivational tool for employees and agencies rated Poor to improve their 
performance, the PBB must be granted in its full aIDount and not subjected to the income tax. 
Hence, immediate passage of this bill is earnestly soug . 
\tlhg 


• 
Sennh 
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SIXTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
) 
'\3 
AUG -6 A10:1 0 
SENATE 
s.No.1213 
Introduced by Senator Ralph G. Recto 
AN ACT 
EXCLUDING THE PERFORMANCE-BASED BONUS FROM THE COMPUTATION 
OF TAXABLE INCOME 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 
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled: 
I 
SECTION 1. Section 32 (B) (7) of Republic No. 
8424, otherwise known as the 
,2 
"National Internal Revenue Code of 1997," as amended is hereby further amended to read as 
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follows: 
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"Sec, 32, 
Gross Income. -
"(A) 
General Definition. - x x x 
"(B) Exclusions from Gross Income. - x x x 
"(I)xxx 
"(2) x x x 
"(3) x x x 
"(4)xxx 
"(5) x x x 
"(6) x x x 
"(7) 
Miscellaneous items. -
"(a) xxx 
"(b) x x x 
"(c) x x x 
"(d) x x x 
"(e)xxx 
"(F) 
PERFORMANCE-BASED 
BONUS 
(PBB) -
A TOP-UP BONUS GIVEN TO 
GOVERNMENT 
PERSONNEL 
OF 
BUREAUS OR DELIVERY UNITS IN 
ACCORDANCE 
WITH 
THEIR 


1 
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CONTRIBUTION 
ACCOMPLISHMENT 
TO 
OF 
THE 
THEIR 
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DEPARTMENT'S OVER-ALL TARGETS 
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AND COMMITMENTS, AS PROVIDED 
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FOR IN EXECUTIVE ORDER NO. 80, 
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SERIES OF 2012; 
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"(G) [(f)1 x x x 
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"(H) [(g)) x x x 
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"(I) [(h)] x x x." 
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SEC. 2. Implementing Rules and Regulations. - The Bureau of Internal Revenue (BIR), 
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Department of Finance (DoF), Department of Labor and Employment (DOLE), and Civil Service 
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Commission (CSC) shall promulgate not later that thirty (30) days upon the effectivity of this 
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Act the necessary rules and regulations for its effective implementation. 
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SEC. 3. Repealing Clause. -All other laws, decrees, orders, issuances and rules and 
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regulations or parts thereof inconsistent with this Act are hereby amended or repealed 
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accordingly. 
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SEC. 4. 
Effectivity. - This Act shall take effect fifteen (15) days after its publication 
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either in the Official Gazette or in at least two (2) newspapers of general circulation. 
Approved,