SENATE President Pro Tempore Ralph G. Recto has filed a measure amending the tax code to shield overtime pay from taxation.
Under Senate Bill No. 601, Mr. Recto proposed to include overtime pay among the tax-exempt items in the National Internal Revenue Code of 1997. Mr. Recto first introduced the measure in the 15th Congress.
He said any revenue foregone in the proposed exemption will be offset by increased consumer spending. He noted the measure will benefit around 26.7 million workers in both the private and public sectors.
“This, in turn, would trigger demand for more goods and services thereby stimulating activity in the industrial and service sectors and eventually generating more taxes,” Mr. Recto said in a statement Monday.
Taxable income currently includes overtime pay components.
The tax code defines “overtime pay” as “compensation due to hours worked in excess of the required normal working hours.”
The Labor Code of the Philippines, under Presidential Decree No. 442, provides that the normal hours of work for all employees does not exceed eight hours per day, five days a week.
Overtime work may be performed provided the employee is given compensation, which the Labor Code specifies as 25% above the worker’s regular wage.
“Instead of being able to rest early and spend more time with the family, the employee is forced to extend working hours to achieve the organization’s goals,” he said.
“Thus, it is only fitting that the employee is properly compensated for additional work hours rendered.” — Charmaine A. Tadalan
