MANILA, Philippines (Mindanao Examiner / August 31, 2008) - Filipino civil workers criticized the Arroyo administration for seeking to pass regulations for the implementation of the tax relief package that were allegedly flawed.
President Gloria Arroyo in June signed into law the Republic Act No. 9504, otherwise known as the “Tax Relief Package Law,” which exempts minimum wage earners in both the private and public sectors from paying income tax and increases personal and additional tax exemptions allowable to individuals.
However, three months after the law was adopted,its implementing regulations have yet to be finalized by the Bureau of Internal Revenue (BIR) and the Department of Finance (DoF). The Public Services Labor Independent Confederation (PSLINK), a national union representing more than 80,000 government employees, claimed that the present draft of the implementing regulations is laden with restrictive provisions that effectively prohibit many minimum wage earners who are supposed to benefit from the law from being covered by the income tax exemption.
“RA 9504 clearly states that workers who are receiving a compensation income not more than the statutory wage fixed by the Regional Tripartite Wage and Productivity Board are considered minimum wage earners and are therefore entitled to exemption from paying income tax,” said Annie Geron, PSLINK general secretary.
“This runs in contrast to what the draft implementing regulations stipulates as the latter creates its own qualifications of who should be covered by the tax exemption package, consequently redefining who a minimum wage earner is,” Geron said.
The state workers’ group was referring to the set of conditions under the draft regulations which state that workers whose basic pay are equal to the minimum wage but receive additional compensation such as commissions or honorarium, benefits in excess of the statutory tax-exempt amount of P30,000, taxable allowances and other taxable income other than the basic pay, holiday pay, overtime pay, hazard pay and night shift differential pay, and other income not subject to final tax shall not be considered as minimum wage earners.
Hence, their entire pay including whatever excess in benefits and additional income that they receive will be subjected to income tax.
PSLINK also condemned as unfair and unlawful the proposal to implement the increase in personal and additional exemptions only to income earned from the month of July. This, according to the state employees union, diminishes the benefits intended by the law to minimum wage earners and individual workers who will benefit from the increased tax exemptions.
“The proposed regulations also violate a previous Supreme Court decision in the Umali v. Estanislao case which ruled that increased tax exemptions should cover compensation income earned for the entire year,” Geron said.
In addition, the group criticized the draft regulations for being unnecessarily stringent with its various administrative requirements and procedures.
The union claimed the required filing of updated exemption status even if there is nothing to update under pain of "disallowance" of any personal or additional exemptions and the filing of quarterly summary lists make compliance excessively cumbersome for both employers and their workers. “We don’t understand why the BIR and the DoF have to complicate the rules for implementing the tax exemption law,” Geron said.
“Instead of providing relief, the draft regulations impose undue burden to employees and employers alike. This is particularly true for the public sector which is already reeling from loads of administrative work.”
PSLINK also said the Arroyo administration may be using the draft regulations to make it difficult for employees to benefit from tax exemption law as its implementation will result to a drop in one of their main sources of revenue.
But the national union argued that the workers should not be made to pay for any reduction in revenue collection that will result from the implementation of the tax relief package law.
“The administration could very well offset their loss in revenue from the workers’ income taxes if only it would stamp out corruption that drains away much-needed resources that could have otherwise gone for public services,” Geron said.
“The tax relief package law is already too little, too late. Workers are already overwhelmed by the high prices of food and fuel. We shouldn’t be made to wait any longer for the proper implementation of the tax exemptions," she said.