Workers’ fringe benefits subject to tax – court

THE Supreme Court on WednesM day ruled that fringe and small value benefits received by governM ment employees can be taxed.

The high court en banc voted unanimously to junk the petition filed by government workers, led by the Confederation for Unity, Recognition and Advancement of Government Employees (CourM age), for lack of merit.

The petitioners assailed the policy imposed by the Bureau of Internal Revenue (BIR) in taxing allowances, bonuses, and compenM sation for services granted, which they claimed were non-taxable.

But the high court affirmed the validity of Sections III, IV, and VII of BIR Revenue Memorandum Order (RMO) 23-2014, which subject the fringe and small value benefits to tax and requires the government, as employer, to withhold the amount corresponding to the tax.

Before the issuance of RMO 23- 2014, government workers’ benefits were not taxed, with the exception of the 13th month pay above P30,000 as well as the socalled “loyalty pay.”

The 15-man court opined that all income received by an emM ployee from his or her employer are presumptively taxable and subject to withholding tax and government, as an employer, has the duty to withhold and remit the proper taxes due.

The high court however said the tax bureau overstepped its authority when it allowed goverM nors, city and municipal mayors, barangay captains, and heads of government agencies and government-owned or controlled corporations to withhold and remit withholding taxes.

Only the Secretary of Finance has such authority, the court said.

In another tax case, the high court ruled that the “just share” or Internal Revenue Allotment (IRA) of local government units (LGUs) must be computed based on all national taxes, and not only on national internal revenue taxes collected by the BIR.

The case arose from a petition filed in January 2012 by former Batangas 2nd District Rep. HermiM lando Mandanas, who is now the provincial governor.

Mandanas assailed the BIR’s wrong computation and alleged misappropriation of IRA funds for LGUs.