Scrap tax on 13th-month pay
The 13th-month-pay law (Presidential Decree No. 851) was conceived as a social justice measure and should not be taxed at all. In its original version, its purpose was to equalize the giving of Christmas bonuses which, at the time, was voluntary and enable all workers in the private sector to cope with the ravages of inflation. That was why no tax was stipulated in the decree. It did not seem right that government takes with its left hand what its right hand gives.
Specified as one-twelfth of the employee’s basic annual pay, the 13-month-pay measure took shape when the late presidential assistant Juan Tuvera directed the Department of Labor to prepare “something” which then President Ferdinand Marcos can offer the labor leaders who were scheduled to call on him. Since then Labor Secretary Blas Ople was in Geneva for an ILO (International Labor Organization) conference, the job fell on me as acting secretary.
At that time, Christmas was approaching and labor unions were expected to clamor for Christmas benefits. Since the 13th-month-pay idea seemed timely and appropriate, I drafted the proposed measure and submitted it to Malacañang. To my surprise, President Marcos approved it without corrections or marginal notes. He asked Johnny Tuvera to put it in decree form.
When the news broke out in the business community, there was an uproar. It was criticized as arbitrary because, really, under
normal circumstances, it would require a series of hearings and intense lobbying before such measure could pass. Work on the 13th-month-pay decree took no more than
24 hours from preparation to approval.
Despite the adverse reactions, to be fair to the late President Marcos, he stood his ground and ordered the immediate implementation of the decree.
Looking back, PD 851 may not qualify as a “star” legislation. But it had the effect of what today’s economists call a “stimulus package.” It not only ensured a noche buena on the workers’ tables, it also boosted their purchasing power at a time when such was most needed.
Business, too, got a shot in the arm with the added currency in circulation.
Today, the decree has undergone changes, notably the revised guidelines issued by then Labor Secretary Franklin Drilon. Its coverage now extends to the government sector up to the boardroom levels, making it a fully inclusive piece of legislation. Would Congress now—in a benevolent act of the state—consider the total removal of the tax on the 13th-month pay?
—AMADO “GAT” INCIONG,
former undersecretary of labor
