Vi wants overtime pay tax-free

MANILA, Philippines - Rep. Vilma Santos-Recto wants the overtime pay of government and private sector workers to be tax-free.

“This would allow employees to fully enjoy the monetary benefits due them for putting in more hours of work and contributing additional physical and mental effort,” Recto said in Bill 2599.

She said her proposal would benefit nearly 40 million salaried workers.

She added that while her proposal would result in foregone revenues, more money in taxpayer’s pockets would raise workers’ disposable income and boost consumer spending, which would benefit the economy.

“This, in turn, would trigger demand for more goods and services, and thereby stimulate activities in the industrial and service sectors and generate more taxes,” she said.

Recto noted that the labor code provides that employees work for eight hours a day for six consecutive days.

“An employee who renders overtime work puts in additional hours of work and requires greater physical and mental effort. Instead of being able to rest early and spend more time with the family, the employee is forced to extend working hours to achieve management’s goals. Thus, it is only fitting that the employee be properly compensated for additional work hours rendered,” she said.

Unfortunately, she lamented that compensation received for overtime work forms part of an employee’s taxable income.

“This not only limits the full enjoyment of monetary benefits due the employee for putting in more hours of work but also diminishes the value of the additional physical and mental effort contributed,” she stressed.

Recto’s bill would amend the tax code by providing that overtime pay or compensation due to hours worked in excess of the required maximum working hours shall not be included in gross income and shall be exempt from taxation.

The Bureau of Internal Revenue, Department of Finance, Department of Labor and Employment and Civil Service Commission would be mandated to issue implementing rules and regulations.