BIR: Gov't workers'

tax not new, based

on 1997 law
The BIR says the tax exemption of government employees
is only up to P30,000 of the 13th month pay and bonuses,
reminds them of their responsibility to pay the right taxes

VOID RMO 23-2014. Government employees wear red ribbons in protest

of what they claim to be an 'unconstitutional' revenue memorandum
order, on August 6, 2014. Photo by Joel Leporada/Rappler

MANILA, Philippines – Internal Revenue Commissioner Kim

Henares said on Thursday, August 7, that the revenue
memorandum order being questioned in court by
government employees is not a new tax.
She said the memo merely clarifies the responsibilities of
the public sector in paying withholding taxes under
existing laws dating back to 1997.

Henares made the clarification a day after government

employees, represented by former senator Aquilino
Pimentel Jr, petitioned the Supreme Court to void certain
provisions of Revenue Memorandum Order (RMO) 23-2014
issued in June, and to suspend its implementing pending
the court’s decision.

The group claimed that the respondents – Henares and

Finance Secretary Cesar Purisima – had erred in taxing
previously tax-free bonuses, allowances, and benefits of
government employees since the power to impose taxes
belongs to Congress.

“We would like to clarify that we did not impose any new
tax. We issued an RMO to clarify that, under Section 32 of
the Tax Code, all compensation, whether in cash or in
kind, whatever they maybe called, are subject to income
tax and therefore, proper withholding tax should have
been deducted and remitted,” Henares said.

The BIR chief said the only exemption is up to P30,000

($683)* of the 13th month pay and bonuses.

“This has been the law since 1997. The private sector and
the executive branch by and large know this and they have
been strictly monitored for compliance,” Henares said.

'Public sector must follow tax laws'

She said the impeachment of then Chief Justice Renato

Corona had highlighted the judiciary’s shortcomings in
complying with tax laws.

“The Corona impeachment put it to our attention that the

judiciary has been remiss in complying. Since Corona was
impeached and we filed a tax evasion case against him,
stemming from a violation of this, and because this is the
law, we have to implement the same to everyone,” Henares
said.

She added, “The obligation to withhold of government is

further emphasized by Section 272 [of the Tax Code]
because it provides a penalty for violation committed by
government."

In March, the Department of Justice filed 6 counts of

willful attempt to evade tax and 6 counts of failure to file
income tax return against Corona before the Court of Tax
Appeals (CTA), based on a complaint filed by the BIR in
August 2013.

Corona was indicted for failing to pay P120.5 million ($2.75

million) in taxes and file his income tax return for 6 years –
2003, 2004, 2005, 2007, 2008, and 2010. The subject
income was supposedly outside of his compensation as a
Supreme Court justice.

In issuing RMO 23-2014 on June 20, 2014, the BIR said this
only sought “to clarify and consolidate the responsibilities
of the public sector to withhold taxes on its transactions
as a customer (on its purchases of goods and services)
and as an employer (on compensation paid to its officials
and employees) under the National Internal Revenue Code
(NIRC) of 1997, as amended, and other special laws.”

The petitioners are seeking certain sections of RMO 23-

2014 to be declared as unconstitutional or null and void,
among them, paragraphs A, B, C, and D of Section 3; and
Sections 4, 6, and 7, and their provisions that impose
duties on certain persons, define offenses and offenders,
and impose penalties for violations.

Section 3 enumerates the taxable allowances, bonuses,

and other benefits of public officials and employees in the
3 branches of government, though not limited to the
following:
Legislative branch

 Anniversary bonus
 Special Technical Assistance Allowance
 Efficiency Incentive Benefits
 Additional food subsidy
 Eight (8th) Salary Range Level Allowance
 Hospitalization Benefits, Medical Allowance
 Clothing Allowance
 Longevity Pay, Food Subsidy
 Transition Allowance
 Cost of Living Allowance
 Inflationary Adjustment Assistance
 Mid-Year Economic Assistance
 Financial Relief Assistance
 Grocery Allowance
 Thirteenth (13th) Month Pay
 Cash Gift and Productivity Incentive Benefit and
other allowances
 Bonuses and benefits given by the Philippine
Senate and House of Representatives to their
officials and employees, subject to the exemptions
enumerated in the RMO

Judicial branch

 Allowances, bonuses, honoraria or benefits

received by employees and officials in the Judicial
Branch, such as the Additional Compensation
(ADCOM)
 Extraordinary and Miscellaneous Expenses (EME)
  Monthly Special Allowance from the Special
Allowance for the Judiciary
 Additional Cost of Living Allowance from the
Judiciary Development Fund
 Productivity Incentive Benefit
 Grocery Allowance
 Clothing Allowance
 Emergency Economic Allowance
 Year-End Bonus
 Cash Gift
 Loyalty Cash Award (Milestone Bonus)
 SC Christmas Allowance
 Anniversary bonuses and other allowances,
bonuses and benefits given by the Supreme Court
of the Philippines and all other courts and offices
under the Judicial Branch to their officials and
employees, subject to exemptions

Constitutional offices

 Allowances, bonuses, honoraria or benefits

received by employees and officials in the
Constitutional bodies (Commission on Election,
Commission on Audit, Civil Service Commissioner)
and the Office of the Ombudsman, subject to
exemptions

Executive

 Productivity Enhancement Incentive (PEI)

Performance-Based Bonus
 Anniversary bonus and other allowances
  Bonuses and benefits given by the departments,
agencies and other offices under the Executive
Branch to their officials and employees, subject to
exemptions

The petitioners also want to lift the P30,000 cap on non-

taxable compensation income in the form of 13th month
pay and other benefits.

The co-petitioners include employee unions from across

the 3 branches of government – employee associations
from the Senate, Court of Appeals, the Sandiganbayan,
Department of Agrarian Reform, Department of Trade and
Industry, Metropolitan Manila Development Authority,
National Housing Authority, Quezon City local government,
and water districts nationwide. – Rappler.com