FULL CIRCLE ON WORKERS' TAX EXEMPTION

Last January 28, 2015, I officially ended my term as President of the Tax Management Association of the Philippines (TMAP), the premier organization of tax professionals in the country.

It was a busy year for TMAP. Aside from having to contend with controversial BIR issuances, such as Revenue Memorandum Circular (RMC) 54-2014 on VAT Refund claims, TMAP found itself deeply immersed in the tax reform campaign -- particularly, in pushing for the new law increasing the tax-exempt bonuses of salaried workers from P30,000 to P82,000 and the lowering of personal income taxes.

Looking back, I realized that TMAP has come full circle, especially in its tax advocacy for the tax exemption of workers.

Way back in 2008, a new tax relief package was enacted into law. Minimum Wage Earners (MWEs) were given tax-exemption while, personal and additional tax exemption amounts were increased. Unfortunately, the BIR decided to interpret the law in such a way that they limited the tax exemption of MWEs and pro-rated the additional tax exemptions during the initial year of implementation.

TMAP made stand that full tax exemption should be given to MWEs while, the increase in tax exemptions should be fully implemented (i.e., not pro-rated) for taxable year 2008. It also allied itself with other business and professional groups for a joint statement on the issue and, together with lawmakers, TMAP co-signed a petition with the Supreme Court to question this BIR regulation.

Fast-forward to 2014.  TMAP highlighted the need to lower income taxes when it published a comparison of tax rates within the ASEAN region, which showed that the Philippines effectively has the highest income tax rates in the region. 

TMAP also supported the various bills in both Houses of Congress, which pushed for the increase in tax-exempt bonus threshold and the revision of the income tax table for individuals. 

 Revised Income Tax Table for Individuals proposed by TMAP

Then, last February 2015, after much pressure from the DOF/BIR to veto it, the President finally signed into law Republic Act (RA) No. 10653, which increases the tax-exempt bonuses from P30,000 to P82,000. What a sweet initial victory for taxpayers!

What's more, just the other day, BIR already issued Revenue Regulations (RR) No. 3-2015, the implementing regulations of RA 10653. It is heartening to know that the BIR properly implemented the new law in accordance with the intent of legislation -- that is, to make the additional tax  exemptions available in full for bonuses and other benefits paid or accrued starting January 1, 2015. 

Given this initial tax relief measure, it is now time to focus our efforts on pushing for more meaningful and significant tax reforms in this country. 

Salaried workers have long borne the brunt of tax collections. It is about time that the Government provides much-needed relief, especially for the low and middle-income taxpayers who have suffered from the unadjusted tax brackets for almost two decades now. We badly need to revise the income tax table for individuals to reflect the adjusted tax brackets considering changes in inflation rate and to lower tax

Meanwhile, we also need to simplify the tax system to pave the way for greater compliance from the business income-earners and professionals. This will greatly help in expanding the very narrow tax base of individual taxpayers, which currently consist mainly of salaried workers. 

There are still a lot of things to do with so little time in our hands. If we are to pass a new tax law, we only have this small window of opportunity between now and June of this year, before the election fever sets in. 

While the workers' tax exemption has come full circle only after 7 years, let us continue to hope, dream and pray that tax reform will soon be a reality here in our country. 

And this should start NOW, not after 2016.