Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

SIXTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. __ 4456

Introduced by HON. RENE L, RELAMPAGOS
First District, Bohol

EXPLANATORY NOTE

‘The 1987 Constitution mandates that “the rule of taxation shall be uniform and
equitable. The Congress shall evolve a progressive system of taxation.”

The concept of uniformity in taxation implies that all taxable articles or
properties of the same class shall be taxed at the same rate. It requires the uniform
application and operation, without discrimination, of the tax in every place where the
subject of the tax is found. It does not, however, require absolute identity or equality
under all circumstances, but subject to reasonable classification. The concept of equity
in taxation, on the other hand, requires that the apportionment of the tax burden be,
more or less, just in the light of the taxpayer’s ability to shoulder the tax burden and, if
warranted, on the basis of the benefits received from the government. Its cornerstone is
the taxpayer's ability to pay, Finally, a progressive system of taxation means that tax
laws shall place emphasis on direct taxes rather than on indirect taxes, with ability to
pay as the principal criterion.

In December 11, 1997, the National Internal Revenue Code of 1997 (NIRC) was
enacted. Chapter VI of the said law enumerated the items to constitute gross income as
well as the allowable exemptions. Among the exemptions are bonuses not exceeding
thirty thousand pesos (Php 30,000.00).

When the NIRC was passed in 1997, employees in the public sector enjoying the
Php 30,000.00 salary were classified under salary grade 28 positions or who were then
occupying Assistant Secretary positions and higher. To date, they receive additional
allowances not enjoyed by regular employees.

With the passage of the Salary Standardization Law or Joint Congressional
Resolution No. 4 last June 17, 2009 and fully implemented in 2012, however, the salary
of Php 30,000.00 are now received by employees occupying salary grade 18 positions.
Salary Grade 18 employees are classified as administrative officers or employees. Also,
under the Salary Standardization Law, salary grade 28 is now pegged at Php 67,684.



Hence, when the NIRC was passed in 1997, the statutory intent was to tax those
classified as salary grade 28 and higher. However, with the current change in the salary
schedule in view of the Salary Standardization Law implemented in 2012 and justified
by the reality of substantial increase in the cost of living, the NIRC should likewise be
amended to be consistent with the legislative intent of the law when it was passed
seventeen (17) years ago. Otherwise, we will be subjecting to tax those employees whose
bonuses and benefits were not previously envisioned to be taxed by law. If passed, the
law will correct the impractical and unanticipated result in the application of the NIRC
to employees who are classified as salary grade 18 positions which is a far-cry from the
original spirit of the tax law.

In the proposed bill, the allowable exemption cap under the NIRC for all bonuses
and benefits received by employees and workers ~ whether in the public or the private
sector will be changed from thirty thousand pesos (Php 30,000.00) to seventy thousand
pesos (Php 70,000.00).

Necessarily, this will greatly improve the purchasing power of the middle grade
income earners and help cope with the ever-increasing cost of living. Not to mention the
inflation since the enactment of the tax law. Finally, this is consistent with the “decent
pay” framework of international labor.

In view of the foregoing, the immediate passage of this bill is earnestly sought.

(
K
RENE, bf RELAMPAGOS


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
First Regular Session

HOUSE BILLNO. _ 4456

Introduced by HON. RENE L. RELAMPAGOS
First District, Bohol

AN ACT
INCREASING THE TAX CAP EXEMPTION OF ALL BONUSES AND
BENEFTS FROM THIRTY THOUSAND PESOS (PHP 30,000.00) TO
SEVENTY FIVE THOUSAND PESOS (PHP 75,000.00) THEREBY
AMENDING SECTION 32 OF REPUBLIC ACT NO. 8424, AS AMENDED,
OTHERWISE KNOWN AS THE "NATIONAL INTERNAL REVENUE CODE
OF 1997"

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Chapter VI, Section 32, paragraph (B) sub-paragraph (7) (e)
Republic Act No. 6566, otherwise known as the "National Internal Revenue Code of
1997” is hereby amended to read as follows:

(e) 13th Month Pay and Other Benefits. - Gross benefits received by
officials and employees of public and private entities: Provided, however, That
the total exclusion under this subparagraph shall not exceed [Thirty thousand
pesos (P30,000)] SEVENTY FIVE THOUSAND PESOS (PHP 75,000.00) which
shall cover:

XXX

(iv) Other benefits such as productivity incentives and Christmas
bonus: Provided, further, That the ceiling of [Thirty thousand pesos
(P30,000)] SEVENTY FIVE THOUSAND PESOS (PHP 75,000.00)
may be increased through rules and regulations issued by the Secretary
of Finance, upon recommendation of the Commissioner AND THE
DIRECTOR GENERAL OF THE NATIONAL ECONOMIC
DEVELOPMENT AUTHORITY, after considering among others, the
effect on the same of the inflation rate at the end of the taxable year AS
WELL AS OTHER ECONOMIC AND SOCIAL FACTORS.


SEC. 2. Repealing Clause. All laws, presidential decrees, executive orders, rules,
and regulations, or portions thereof, inconsistent with this Act are hereby repealed or
modified accordingly.

SEC. 3. Separability Clause. If any part of provision of this Act shall be held
unconstitutional or invalid, other provisions hereof which are not affected thereby shall
continue to be in full force and effect.

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

Approved,