Minimum Wage Earners May Pay Tax If Granted Salary Hike

MANILA, Philippines - Salaries of minimum wage earners in Metro Manila and elsewhere are subject to income tax if their employers grant them even a minimal pay raise.

The Bureau of Internal Revenue (BIR) issued the clarification yesterday following complaints from security guards, janitors and other laborers.

Ordinary workers said tax collectors placed their annual salaries under tax coverage due to a small additional pay.

Under Section 22 of the Tax Code, minimum wage earners are exempted from paying income tax, which privilege is extended to cover holiday, overtime, hazard and night shift differential pays.

But the BIR's Tax Information and Education Division said the tax exemption benefit is automatically withdrawn if employers add even a small amount, say R5 or even R1 to the worker's daily take-home pay.

Revenue officials conceded that under this circumstance wage earners will end up the loser because the extra pay is much less than what they will be paying the BIR with their entire wages now subject to taxation.

"They might as well reject such generous offer by their employers if the extra amount is not enough to cover the tax liabilities," one revenue district officer said.

The National Wages and Productivity Commission of the Department of Labor has scheduled varying wage scales for workers in different regions of the country.

In Metro Manila, the daily minimum pay ranges from R389 to R426 depending on the nature of the job, be it factory, or agriculture, or clerical.