The P30,OOO ceiling was fIrst introduced in 1994 upon the effectivity of Republic Act No. 7833. At that time, the lowest monthly basic salary for government employees (Salary Grade 1, Step I) was P2,800 and that ofthe President of the Philippines (Salary Grade 33) was at P25,OOO.
At present, the basic salaries have been adjusted such that SG-I Step I now stands at P9,000 and SG-33 is at PI20,000. While there have been increases in the legislated pay scale of private and government personnel, the P30,000 cap for the income tax exemption of the 13th month pay and Christmas bonuses have remained the same. This amount no longer mirrors prevailing circumstances.
Early disclaimer: I am no tax, statistics, or law expert but I know enough that if this bill gets approved, middle class Filipinos will have happier lives. I merely put this up to kick off a strong need for this change because it is so badly needed. I just couldn't sit here ranting about it online. So here I am, posting about it. Constructive suggestions are welcome.
This is what it's about: the old P30,000 bonus tax exempt is already 20 years old. TWENTY! Why we do this? Why we not update this huh? Using the latest inflation rate (4.1%) and applying it retrospectively for twenty years every year since 1994, it should also have increased to P67,000. But I'm not complaining with the suggested P75,000. The higher, the merrier.
And here's a pretty nice component in the SB-256:
Furthermore, the bill also provides that the ceiling of P75,OOO shall be adjusted to its present value using the Consumer Price Index (CPI) as published by the National Statistics OffIce (NSO), three years after the measure's effectivity and every three years thereafter.
They're going to readjust the bonus tax exempt based on inflation every three years. Perfect. It will keep itself relevant with the times. How awesome is this bill? And then it gets thumbed down by BIR because it will lose billions and should have replacement source? Wouldn't the abolition of the P25 billion pork barrel enough replacement for you, dear Hinares? Take your few billions loss from tax exempt raise and take it from the PDAF instead. We will be happy. Trust me.
Alright, let's get down to the nerdy part of the program: real numbers!
Thanks to my previous manager Cathy Jimenez for making the effort to create sample tax calculations for me before and after the bonus tax exempt is increased. The detailed calculations in Excel files are available upon request but here's a quick summary of the sample data used in the tables:
|Monthly Salary||Annual Tax Before SB-256||After SB-256||Difference|
|PHP 30,000||PHP 64,490||PHP 64,490||PHP 0|
|PHP 50,000||PHP 143,656||PHP 137,256||PHP 6,400|
|PHP 75,000||PHP 247,656||PHP 233,256||PHP 14,400|
* This table assumes no other bonuses on top of the 13th month pay and that the monthly pay is 100% income taxable (not a mix of income and allowances). The differences could go even higher if you factor in leave conversions and other company-based bonuses. Table was updated on Feb 3 to reflect 100% income taxable monthly salary sample. Thanks to @doge for the enhancements.
Obviously, there is no immediate benefit for those earning 30k/month because their 13th month is just within the tax exempt amount. Again, this is assuming that there are no other bonuses. And will you look at the annual tax right now? It's more than two months worth for the first row, almost 3 months worth for 2nd row and 3rd rows. Crazy tax rates. But that's another topic.
We pay on time. Every time. We deserve better service. And aside from being the right thing to do to catch up with inflation, this is us saying we are not satisfied with the our government's performance (pork barrel scam, Yolanda issues, and more) and we are removing your bonuses, PH government. They still get a raise when we get a raise in our monthly salary anyway. It's not right that they get a bonus when we get a bonus because they don't deserve it. At least not right now.
If you agree with my point and need this tax relief, do join me in this effort to gather critical mass and:
- Sign the online petition at change.org. It's my first time making an onlin petition so, you know, have mercy.
- Email the Senate President Franklin Drilon directly that you want this change implemented.
- Email other senators about it using the information on the Philippine Senate website contact page.
- Sharing the online petition with your friends and get them to sign it.
- Use the #TaxExemptIncrease hashtag
Of the people, by the people, for the people.
- Feb 3 2014 7:48PM - Using real fluctuating inflation rates from 1994 to 2013, my buddy @dgoe has found out that PHP30,000 in 1994 should be more than PHP80,000 this year! Calculation available upon request.
- Mar 12 2014 12PM - Already at 264 signees! Yey! Slowly but surely. It's something.