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Business
groups, including the Tax Management Association of the
Philippines, are right in their seeking revisions to the
emerging implementing rules and regulations (IRR) of
Republic Act (RA) 9504, the law that exempts
minimum-wage earners from payment of income tax.
But for
the wrong reasons.
They
only say that the rules and regulations being finalized
by the Bureau of Internal Revenue (bir) defeat the
“social intent” of the law—to give economic relief to
minimum-wage earners—and are an administrative
nightmare.
More
than in the IRR, the problem with RA 9504 lies in the
law itself.
The law
is flawed, unfair, discriminatory, inequitable and
unconstitutional.
It is
flawed because the law, as worded, proceeds from a wrong
perspective.
In
crafting the law, perhaps for public-relations purposes,
Malacañang and Congress chose to look at the taxpayer,
not the income for which an individual pays a tax to the
state.
Thus,
the law exempts the minimum-wage earner—not the minimum
wage—from assessment of income tax. It exempts the
individual, not the income.
In the
process, the law created two “classes” of taxpayers—the
minimum-wage taxpayers who don’t pay any tax on their
personal income, and the more-than-the-minimum-wage
taxpayers who are taxed.
But the
law that RA 9504 amends, the National International
Revenue Code, imposes a tax on income, not on the
individual. That’s why this section of the Code refers
to “income taxation.” What the law taxes is the income,
not the individual, although, in reality, it is the
individual who is taxed to death by the government.
And
because it is flawed, it became unfair, discriminatory
and inequitable.
It
became unfair to those who are earning above the minimum
wage regardless of amount—but more unfair to those
earning just a little above the minimum wage. It
discriminated against those earning above the minimum
wage and made the tax system inequitable.
To
appease those earning above the minimum wage,
Congress—in this same law—raised the personal exemptions
of taxpayers to P50,000. But there the unfairness,
discrimination and inequity lie.
Consider
these:
In Metro
Manila, the minimum wage is computed at about P10,000 a
month. That means a janitor who is paid the minimum wage
makes roughly 120,000 a year, which, under the law, is
completely exempt from income tax, whether he is single,
married, with or without dependents. Moreover, RA 9504
also exempts from tax the overtime pay and bonuses of
“minimum-wage earners.”
Compare
this, then, to a clerk who is single with no dependent
and who earns P11,000 a month, which is barely P1,000
above the minimum wage earned by the janitor or roughly
P132,000 a year. Under the law this clerk must pay full
tax on his wages. So under the draft IRR of the BIR
(Example VIII), he pays a tax of P1,324.90 a month,
which is withheld from his monthly paycheck. Thus, his
net take home pay would be P9,675.10, which is P1,342.90
less than the take-home pay of the janitor which is the
full P10,000 a month.
Why?
That’s because the minimum-wage earner doesn’t pay any
tax. In other words, his personal exemption is P120,000
a year—the equivalent of the minimum wage. On the other
hand, the one who earns P11,000 a month has personal
exemption of only P50,000, which means he must pay a tax
on P82,000 of his P132,000 annual income.
So if
you are the clerk, you would actually ask your employer
to lower your salary to P10,000 a month so that, in
effect, you will have an increase of P325 a month in
your take-home pay. On the other hand, if you are a
minimum-wage earner and your employer offers to promote
you and give you a 10-percent increase, you will decline
the offer because you will actually lose P325 a month.
RA 9504
skews the compensation structure in place in all
business establishments and government offices. It
destroys the concept of equitable work and salary
distribution.
And
because it makes the income-tax system inequitable, RA
9504 is unconstitutional. It violates the constitutional
provision that says, “Congress must evolve a system of
taxation that is progressive and equitable.”
All
these could have been avoided, though, if our tax
geniuses in Malacañang and Congress simply amended the
section on personal exemptions by stating that,
henceforth, the personal exemption that a taxpayer is
allowed to deduct from his income is equivalent to the
minimum wage, whatever that is. |
