SC: Government employee benefits taxable
The Supreme Court (SC) upheld the legality of Bureau of Internal Revenue regulations (BIR) subjecting government employees’ benefits like allowances and bonuses to withholding tax.
According to SC Public Information Office, the SC voted to affirm the validity of Sections III, IV and VII
of Revenue Memorandum Order 23-2014 which classified as taxable compensation allowances, bonuses, compensation for services granted to government employees and other benefits that have been enjoyed by government employees without any tax deductions, except for the 13th month pay, in excess of P30, 000 and the loyalty pay.
But the SC voided Section VI of RMO 23-2014 requiring 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.
The SC upheld the arguments of the Unity, Recognition and Advancement of Government Employees (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.
“In imposing upon these officials an obligation not found in law or in implementing rules, the Commissioner of Internal Revenue (CIR) did not merely issue an interpretative rule designed to provide guidelines for enforcement of the law but supplanted details – a power vested by law only on the Secretary of Finance,” the SC said.
In upholding the validity of Sections III and IV, the SC on the other hand 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.
Aside from COURAGE, the other petitioners were Judiciary Employees Association of the Philippines (JUDEA-PHILS.), Sandiganbayan Employees Association (SEA), Sandigan ng mga Empleyadong Nagkakaisa sa Adhikain ng Demokratikong Organisasyon (S.E.N.A.D.O), Association of Court of Appeals Employees (ACAE), Department of Agrarian Reform Employees Association (DAREA), Social Welfare Employees Association of the Philippines-DSWD, Department of Trade and Industry-Employees Union, Kapisanan Para Sa Kagalingan ng mga Kawani ng MMDA, Water System Employees Response, Consolidated Union of Employees of the National Housing Authorities, and the Kapisanan ng mga Manggagawa at Kawani ng Quezon City.