Exclude overtime pay from taxable income — Vilma

MANILA — First-term Rep. Vilma Santos-Recto (6th District, Batangas) has sought the exclusion of overtime pay from the computation of taxable income.

Recto said this would allow government and private employees to fully enjoy the monetary benefits due them for putting in more hours of work and contributing additional physical and mental effort.

Recto, chairperson of the House Committee on Civil Service and Professional Regulation, said her proposal is expected to benefit an estimated 39.8 million employees from both private and public sectors.

While her proposal will cost the government foregone revenues, Recto stressed that more money in taxpayer’s pockets would raise disposable income and boost consumer spending, which would benefit the economy.

“This, in turn, would trigger demand for more goods and services, and thereby stimulate activities in the industrial and service sectors and generate more taxes,” said Recto.

Recto noted that the Philippine Labor Code prescribes the maximum hours of work for employees at eight hours a day for six consecutive days.

“If the employee works beyond eight hours, the employer is required to pay additional compensation equivalent to the employee’s regular wage plus at least 25 percent of his regular wage. If the employee renders overtime on a holiday or rest day, the rate is increased to 30 percent,” Recto said.

The Batangas lawmaker said government employees are also entitled to overtime pay governed by Civil Service laws and rules.

“An employee who renders overtime work puts in additional hours of work and requires greater physical and mental effort. Instead of being able to rest early and spend more time with the family, the employee is forced to extend the working hours to achieve management’s goals. Thus, it is only fitting that the employee be properly compensated for additional work hours rendered,” said Recto.

Unfortunately, Recto said compensation received for overtime work forms part of an employee’s taxable income.

“This not only limits the full enjoyment of monetary benefits due the employee for putting in more hours of work but also diminishes the value of the additional physical and mental effort contributed,” said Recto, also a multi-awarded movie actress and a former governor of Batangas.

Recto’s proposal, House Bill 2599, now pending at the House Committee on Ways and Means, seeks to amend further Section 32 (B) (7) of Republic No. 8424, otherwise known as the “National Internal Revenue Code of 1997,” as amended, pertaining to Exclusions from Gross Income.

The amendment provides that overtime or compensation due to hours worked in excess of the required maximum working hours shall not be included in gross income and shall be exempt from taxation.

The Bureau of Internal Revenue (BIR), Department of Finance (DOF), Department of Labor and Employment (DOLE), and Civil Service Commission (CSC) shall promulgate not later than 30 days upon the effectivity of the Act the necessary rules and regulations for its effective implementation. PNA/northboundasia.com