MINIMUM WAGE EARNERS WHO SUFFERED DEDUCTION FOR THE PERIOD JANUARY TO JULY 2008 ARE ENTITLED TO TAX REFUND
On July 6, 2008, R.A. 9504 took effect giving tax exemption on Minimum Wage Earners (MWE). The BIR required that those exempted should still pay tax from January 1, 2008 to July 5, 2008, or the so-called pro-rated application, prior to the effectivity of tax exemption law for MWE.
Is the BIR correct in pro-rating the tax exemption? No.
The Supreme Court said that there is no reason to make a distinction between the income earned prior to the effectivity of the amendment (from 1 January 2008 to 5 July 2008) and that earned thereafter as none is indicated in the law.
The principle that the courts should not distinguish when the law itself does not distinguish squarely applies to this case. Therefore, there is no legal basis for the BIR to reintroduce the prorating of the new personal and additional exemptions. In so doing, the BIR overstepped the bounds of their rule-making power.
The MWE is exempt for the entire taxable year 2008. As in the case of the adjusted personal and additional exemptions, the MWE exemption should apply to the entire taxable year 2008, and not only from 6 July 2008 onwards.
The Court directed the Secretary of Finance and Commissioner of Internal Revenue to grant a refund, or allow the application of the refund by way of withholding tax adjustments, or allow a claim for tax credits by (i) all individual taxpayers whose incomes for taxable year 2008 were the subject of the prorated increase in personal and additional tax exemption; and (ii) all MWEs whose minimum wage incomes were subjected to tax for their receipt of the 13th month pay and other bonuses and benefits exceeding the threshold amount under Section 32(B)(7)( e) of the 1997 Tax Code.
(Soriano vs. Secretary of Finance, G.R. No. 184450, G.R. No. 184450, January 24, 2017)
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