• Exemption from tax of 13th month pay may be lifted 
  • This is due to the proposed income tax reform of the Duterte administration 
  • The tax, however, is lower than the current income tax rates 

The tax-free yearend bonuses that employees enjoy may soon be hurt with the proposal to reform the tax system.

House of Representatives Ways and Means Committee Chairperson Dax Cua said in an ABS-CBN article that the tax exemption of the 13th month pay may be removed once the tax reform program proposal of President Rodrigo Duterte is implemented.

In February last year, former President Benigno Aquino signed into law the measure that seeks tax exemption for the 13th month pay of those earning below P30,000 monthly.

Although there are no final details yet, Cua said that the tax of the bonus would be smaller compared to the existing income tax rates.

The draft tax reform program of the Duterte administration seeks the lowering of income tax of individuals who are at lower and middle income brackets. Their tax rates are pegged to be downgraded from 32% to 25%.

Those earning more than P5 million every year belong to the high-income bracket and would be taxed as much as 35%.

Other areas where the government are seeing higher income tax rates is the excise tax on tobacco, alcohol and sugar products. The administration is also eyeing the removal of exemptions in the value-added tax.

Reforming income tax is among the main promises of Duterte when he was still gunning the presidency in the last campaign season.

In the 16th Congress, various measures have been passed to amend the outdated tax system but all went to waste with none of them passed through the plenary floor.