Various groups of state workers trooped to the Supreme Court on Wednesday to seek for reconsideration of its ruling last July that upheld the Bureau of Internal Revenue’s imposition of withholding tax on their non-salary benefits.
The petitioners led by the Confederation for Unity, Recognition and Advancement of Government Employees pleaded the SC to overturn its decision that affirmed the legality of Revenue Memorandum Order No. 23 issued by the BIR in June 2014 that imposed up to 32 percent tax on allowances, bonuses, compensations for services and other fringe benefits of government workers.
COURAGE national president Ferdinand Gaite said that the high court ruling would have an adverse effect to government personnel.
“We are already reeling from the effect of high prices caused by the TRAIN Law [Tax Reform for Acceleration and Inclusion Act], oil price increase and the peso depreciation, and now this reduction on our ‘take-home pay’ which is not even enough to take us home will further aggravate our situation,” Gaite said in an interview.
The petitioners reiterated their assertion that the RMO widened the scope of taxable fringe benefits, which is not allowed under the National Internal Revenue Code.
In its decision last July 3, the SC held that the BIR did not violate the constitutional right of government workers to due process and did not usurp the legislative power of Congress.
According to the tribunal, the tax bureau’s imposition of withholding tax on the benefits of government workers under Sections 3 and 4 of RMO cannot be considered as a new tax.
The SC ruled that “no additional tax is imposed as the two sections merely mirror the relevant provisions of the National Internal Revenue Code [NIRC] of 1997 on withholding tax on compensation income.”
The high tribunal also held that not even petitioners from the judiciary, the Office of the Ombudsman and constitutional commissions that enjoy fiscal autonomy are granted immunity or exemption from payment of withholding taxes under the law.
However, while the SC upheld the tax measure on allowances and bonuses of government employees, it struck down Section 6 of the assailed RMO that required provincial and local officials from withholding and remitting taxes of government workers under their respective offices.
The SC pointed out that the BIR “overstepped the boundaries of its authority to interpret existing provisions of the NIRC of 1997 in issuing Section VI as the NIRC of 1997 does not require any of these officers to deduct, withhold, and remit the correct amount of withholding taxes.”
The SC specifically stated that this ruling is prospective in application, which means that the tax measure on allowances and bonuses of government worker will continue but the requirement on governors, mayors, and other local officials to collect taxes will now have to stop.
The tribunal also denied the prayer of petitioners to issue a writ of mandamus ordering the respondents to upgrade the ceiling of P30,000 for the 13th-month pay and other benefits of concerned officials and employees of the government, which it held was already moot and academic.
The ruling took note of the Tax Reform for Acceleration and Inclusion law, which adjusted the coverage of the withholding taxes for bonuses and allowances of workers. But it did not state how exactly the TRAIN law will affect the implementation of the RMO.