BIR insists state bonuses subject to tax

MANILA, Philippines - Unfazed by mounting pressure from government workers, the Bureau of Internal Revenue (BIR) insisted yesterday that all allowances, bonuses and other monetary benefits received by any government official in excess of P30,000 per year are subject to tax.

Government employees have asked the Supreme Court (SC) to stop the BIR from imposing taxes on their bonuses and other financial benefits to augment their wages.

BIR Commissioner Kim Henares pointed out that the agency is merely implementing an existing law and that no new taxes were imposed on state employees.

Henares cited Section 32 of the National Internal Revenue Code, which states that compensation for services in whatever form paid and no matter how called forms part of gross income that is subject to withholding tax.

Revenue Memorandum Order No. 23-2014 only clarified the responsibilities of all officials and employees in the public sector (whether exercising proprietary or governmental functions) to withhold taxes on compensation paid to them, Henares said.

She said the law covers all government offices (municipal, provincial and city) including the legislative branch, judicial branch, constitutional bodies such as the Commission on Elections, Civil Service Commission, Commission on Audit and Office of the Ombudsman, as well as government-controlled corporations such as the Bangko Sentral ng Pilipinas, Manila Waterworks and Sewerage System, the Philippine Deposit Insurance Corp., Government Service Insurance System, Social Security System.

“No one is above the law so government employees must adhere to it,” Henares said.

Henares likewise cited the case of former chief justice Renato Corona, which brought to light the failure of the judiciary to withhold taxes on allowances and other monetary perks.

“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 this to everyone,” Henares said.

Subject to withholding tax are the additional compensation, extraordinary and miscellaneous expenses, 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, SC Christmas allowance, anniversary bonuses and allowances and benefits given by the Supreme Court and all other courts and offices under the judicial branch to their officials and employees.

“The obligation to withhold of government is further emphasized by Section 272 because it provides a penalty for violation committed by government,” Henares said in a statement.

Failure to withhold or remit taxes shall result in the imposition of a fine of not less than P5,000 but not more than P50,000 or imprisonment of six months but not more than two years or both.