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Under RMO No. 23 - 2014, which took effect on July 7, 2014, all benefits received
by employees and officers of government will be subject to 30-32 percent tax.
The High Court added that "the Government as an employer has the duty to
withhold and remit proper taxes due thereon."
The High Court ruled that (a) all income received by an employee from his/her
employer are presumptively taxable and subject to withholding tax; (b)
government, as an employer, has the duty to withhold and remit the proper taxes
due; and (c) an employee who claims exemption from withholding taxes has the
burden to prove the factual and legal bases of the claim before proper
administrative and judicial proceedings.
The Court, however declared null and void Section 6 of RMO 23-2014 which
compels local government officials such as governors, city and municipals,
barangay captains, and heads of office in government agencies and government-
owned or controlled corporations to withhold and remit withholding taxes.
It agreed with the arguments of the petitioners led by the Courage that Section
VI violated the principles of decentralization and local autonomy set forth under
Republic Act 7160 or the Local Government Code of 1991 as it obliges local
government officials to withhold the questioned taxes, and if they fail to do so,
they may be fined or imprisoned pursuant to the said provision.
“For this reason, the CIR acted in grave abuse of discretion in issuing Section 6
of RMO 23-2014,” it added.
Meanwhile, in upholding the validity of Sections 3 and 4, the Court explained that
contrary to the claim of the petitioners, there is no additional tax imposed as the
sections merely mirror the relevant provisions of the National Internal Revenue
Code of 1997 on withholding tax on compensation income.
The Court stressed that despite the fiscal autonomy being enjoyed by the
judiciary, Ombudsman and Constitutional Commission, this does not give them
immunity or exemption from paying taxes imposed under the tax code.
Furthermore, the petitioners said the subject RMO would affect their socio-
economic plight especially in light of the rising prices of basic commodities.