Overtime pay and bonuses, including the 13th-month pay, should be exempted from taxes to bolster financial security for both government and private sector workers, according to Makati City Mayor Abigail Binay.
Binay, a senatorial candidate, underscored the need to amend the Tax Code, reclassifying these earnings as “non-taxable income” to alleviate the impact of rising inflation and living costs.
“Exempting minimum wage earners from income tax is not enough. Moreover, the current non-taxable income rates are no longer realistic given the present economic conditions in the country,” Binay said.
The Tax Reform for Acceleration and Inclusion (TRAIN) Law or Republic Act No. 10963 set the threshold for non-taxable income at P20,833 per month or P250,000 per year.
The law excludes the 13th month pay and other bonuses up to P90,000 from the taxable income, and any excess is included in the computation of taxable income for the applicable tax year.
“Workers deserve to enjoy their overtime pay and bonuses in full. It is but fair to fully compensate their hard work and extended hours of working which cut into their supposed rest period and family time,” Binay said.
The senatorial aspirant said that excluding overtime pay from the computation of taxable income would raise the take-home pay of workers.
“If they receive their OT pay in full, they will have more disposable income to spend for the basic needs of their families like food, clothing, shelter, water, and electricity. They will also be able to cover other day-to-day expenses of family members like transportation in going to and from work and school,” Binay said.
She said making the 13th month pay and other bonuses tax-exempt would enable Filipino families to fully experience the joys of Christmas and welcome the New Year with hope and cheer, the mayor said.