Recto calls for tax-free performance bonus

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    THE performance-based bonus of government employees should be tax-free, Senate President Pro Tempore Ralph Recto said yesterday.

    He said the monetary value of the bonus, which was formulated as an “effective reward for exemplary work,” has been reduced as it is subject to income tax.

    “Government is a machine whose parts should move in unison towards the attainment of its strategic goals as reflected in its development plans. This machinery is judged by the people through its outputs in terms of delivery of goods and services. However, the best-crafted strategic development plans will be for naught if civil servants who will implement these are not inspired and committed to achieve the plans,” Recto said in Senate Bill No. 602.

    The measure seeks to amend Section 32 (B) (7) of the National Internal Revenue Code of 1997 by including the performance-based bonus (PBB) in the miscellaneous items excluded from the computation of gross income tax.

    Recto said the PBB should be tax-free for it to serve “as a meaningful reward for employees who walked the extra mile towards the attainment of agency goals.”

    “The bill could likewise serve as a motivational tool for agencies and employees rated ‘poor’ to improve their performance,” Recto added.

    Aside from the PBB, the government also grants a P5,000 across-the-board Productivity Enhancement Incentive to all government employees.