Manila judges, court employees challenge BIR regulation

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Thursday, August 21, 2014


JUDGES and court employees in Manila joined other government workers in asking the Supreme Court (SC) to stop the Bureau of Internal Revenue (BIR) from subjecting their allowances and fringe benefits to withholding tax.

In a petition for certiorari, the Regional Trial Court Judges Association of Manila and Philippine Association of Court Employees-Manila chapter assailed Revenue Memorandum Order (RMO) 23-2014 for stepping on the independence of the judiciary and lack of due process.

They said the tax memorandum had no blessing from Finance Secretary Cesar Purisima and Congress, which enacted a law (Republic Act 9227) under the Arroyo administration granting special allowances to justices, judges and court personnel.

The special allowances can be considered as fringe benefits under Section 33 (A) of Tax Code as petitioners said these should not be subjected to any withholding tax because the grant is "indisputably necessary" to insulate the judiciary from outside influence.

Section 33 (A) exempts a fringe benefit from withholding tax if it is essential to the trade, business or profession of the employer or it is for the convenience or advantage of the employer.

"Stated differently, the grant of special allowances under the law is undeniably necessary to and for the advantage of the employer, the judiciary, for it guarantees the decisional independence of justices and judges as well as the institutional dependence of the judiciary as a whole," the petition stated.

Clothing allowance, cash gift and loyalty cash award are also not taxable, the petition added, because these are de minimis benefits, which are offered by the employer as a means of promoting health, goodwill contentment or efficiency of workers.

BIR Commissioner Kim Henares allegedly not only erred in her interpretation of the law but also "arrogated unto herself" legislative powers when she imposed withholding tax on allowances and benefits of the members of the judiciary which have never been previously taxed.

These include tax-exempt allowances and benefits such as the SC Christmas allowance, anniversary and milestone bonuses, grocery and year-end bonus.

Henares had shot down claims of new taxes, saying Section 32 of the Tax Code mandates that all compensation, whether in cash or in kind whatever they may be called, are subject to income tax and remitted to the government.

The only exemption is up to P30,000 of the 13th month pay and bonuses.

“Even if we are to assume for the sake of argument that RMO No. 23-2014 is a valid act, but obviously it is not, the independence of the judiciary enshrined in the Constitution demands that said memorandum should not apply to members of the judiciary,” the petition said.

It called for the issuance a temporary restraining order (TRO), the same relief sought by the petition filed on August 6 led by state workers’ group Confederation for Unity, Recognition and Advancement of Government Employees (Courage).

The SC directed Henares and Purisima on Tuesday to comment on Courage’s petition within 10 days. (Sunnex)

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