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Wednesday, September 10, 2008

On Delays and Debate: Thoughts on the New Tax Rules of RA 9504

Guest Blogger Christopher Siena Writes about his thoughts on the recently approvd law on tax exemptions.

The President Gloria Arroyo signed Republic Act 9504 into law promising immediate financial relief to workers specially those who are within the minimum wage bracket. However, it has been three months since it was signed and it has not yet been implemented due to delays and debate over the Implementing Rules and Regulations (IRR).

The new law exempts minimum wage earners from the withholding tax and granting bigger exemptions to other fixed income earners. From the current P20,000 personal exemption for single taxpayers, P25,000 for head of family, and P32,000 for married individual, the law fixes the tax exemption at P50,000. The additional exemption for dependents will also increase from P8,000 to P25,000.

In light of these changes, debates arise as to the effectivity of the law whether it would be July or January. BIR insists that the law should take effect on July, when it was signed by the president. Making it effective January will drastically lower their collection targets. On the other hand, legislators and interest groups want it to be retroactive and effective January of this year claiming that the intention of the law is provide immediate relief to the workers specially those who are within the minimum wage bracket.

Apart from the delays on the implementation, RA 9504 has a flaw in exempting minimum wage earners from tax. Those who earn a little above minimum wage shall not enjoy the benefits of exemption. They will, in turn, fancy for a reduction of salary to minimum which entitles them to exemption and thus bigger take home pay. It should be noted that doing such, according to BIR, is prohibited.

Looking at the different interpretations of the effectivity of the new tax rule plus the inherent flaw, it is no wonder why there are delays on implementation. One can argue that it would be better to wait and let the authorities resolve the issue to arrive at a perfect and equitable solution. Even so, one should consider that the low income earners are the first to suffer. The benefits that they are to enjoy several months ago are still being delayed up to now..

1 comment:

  1. Anonymous3:55 PM

    you are right....kelan pwede ipatupad and RA 9054..everybody was hoping and expecting for tax relief but until now we are still waiting in vain.... ano ba talaga?


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