Bill to exempt overtime pay from income tax gains Senate support

Abill seeking to exempt the overtime pay of workers from income tax has gained support in Senate. Senate President Vicente Sotto III welcomed the proposal of Senate President Pro Tempore Ralph Recto to make the overtime pay given to government and private sector employees tax-free.

He said the Upper Chamber, which is currently on a holiday recess, will calendar the measure for discussion when sessions resume on Jan. 20.

“They are very significant measures and I will surely support them,” Sotto said of Recto’s bill recently.

Sen. Imee Marcos likewise believes that overtime pay should not be included in the imposition of taxes.

“Dapat! Kasi wala naman OT (overtime) sa gobyerno talaga, tapos [sa] public or private 27 to 32 percent na sa basic pay ang nata-tax, [ka] wawa naman [ang] empleyado. At wala pang ligtas dahil bukong-buko sa paycheck! Samantala, ang mga korporasyon, natatago ang kinikita, mga professionals minsan walang resibo, lugi lagi [ang] empleyado (That should be tax free! Because there is no such thing as OT in government, and in public or private, basic pay is taxed at a rate of 27 to 32 percent and their wages are seen in paychecks! While corporations, on the other hand, can hide their profits, and professionals sometimes have no receipts; workers are always at a disadvantage),” Marcos said in a text message.

Recto has filed Senate Bill No. 601 which seeks to amend the National Internal Revenue Code of 1997 to exclude overtime pay from the computation of taxable income. The bill covers all employees, whether from the government or private sector.

He said the measure will ”trigger demand for more goods and services, thereby stimulate activities in the industrial and service sectors and eventually generate more taxes.”

Under the Labor Code, the normal hours of work of any employee shall not exceed eight hours a day and should include a one-hour daily lunch break.

If the employee renders more than eight hours of work, the employer shall pay additional compensation equivalent to the employee’s regular wage plus at least 25 percent of his regular wage, and if the overtime work falls on a holiday or rest day, the rate is increased to 30 percent.

State workers are also entitled to overtime pay subject to Civil Service laws, rules, and regulations.