All types of income including allowances, bonuses, and incentives are now subjected to tax as ruled by the Supreme Court. The High Court has finally decided on its ruling regarding the filed petition of government workers questioning the legality of Kim Henares’ Revenue Memorandum Order No. 23-2014.

The petition filed by the Confederation for Unity, Recognition, and Advancement of Government Employees (COURAGE) and several union groups challenged the validity of the memorandum. They said that it had crossed the independence of the judiciary and even lack due process since it did not have any blessings from former Finance Secretary Cesar Purisima.

Income including allowances, bonuses, and incentives to be taxedThey further argued that special allowances are considered fringe benefits under Section 33 (A) of Tax Code. This means that special allowances must not be taxed since the grant is “indisputably necessary” to avoid any possible outside influence.

In fact, Section 33 (A) exempts fringe benefit from withholding tax if it is considered essential to the trade, business or profession of the employer. This includes clothing allowance, cash gift, and loyalty cash award to promote health, goodwill contentment or efficiency of workers.

They also accused BIR Commissioner Kim Henares to have “arrogated unto herself” legislative powers by imposing a tax on allowances and benefits of the members of the judiciary.

However, the Supreme Court announced that all income received by an employee are presumptively taxable. IN effect, even the government is considered an employer and has the duty to withhold and remit proper taxes.

The High Court even added that the Judiciary, Ombudsman and Constitutional Commissions are not immune or exempted from paying taxes as imposed by law. The RMO No. 23-2014 has simply reflected what has been indicated in the Tax Code.

What the SC had nullified is the part of Section VI of the memorandum order stating that governors, mayors, Barangay captains and heads of government agencies and government-owned or controlled corporations should withhold and remit taxes. /InquirerPh