DOJ Opinion No. 082, s. 1994

DOJ OPINION NO. 082 , s. 1994 June 3, 1994 Respectfully returned to the Honorable Executive Secretary, Malacaang, Manila the within paper relative to the request of the Commissioner of Internal Revenue for reconsideration of Memorandum Circular No. 145 of the Office of the President dated January 17, 1992, which adopted this Department's Opinion dated July 3, 1991 to the effect that the Personnel Economic Relief Allowance (PERA) is not taxable income under existing laws and regulations. After re-examining the reasons that impelled us to conclude the PERA is not subject to income tax, as well as the arguments raised in the aforesaid request for reconsideration, we find no cogent reason to reconsider our opinion on the matter. In the said opinion, we stated that: "The intent to equate PERA with computable RATA or similar allowances is quite clear from the foregoing provision of the 1991 Budget and its implementing Budget Circular. The 1991 Budget expressly denies the grant of PERA to those employees who are already receiving computable representation and/or transportation allowances . On the other hand, Budget Circular No. 4, reiterating the said prohibition, adds the qualification that "if the amount [of computable RATA being received by such employees] is less than P500, they shall receive the difference " From these provisions, the intent to consider the two allowances, PERA and RATA, on the same plane and in the same light is very evident. cdll The question now is whether or not commutable RATA is exempt from the withholding tax. This question has been categorically answered in the affirmative by the Commissioner of Internal Revenue in his letter dated April 15, 1991 addressed to the Executive Director, Postal Office, and which letter was circularized by COA through its COA Memorandum No. 91-709. The pertinent portion of the aforesaid letter reads: 'RATA is granted under Section 34 of the General Appropriations Act; 'SEC. 34. Representation and Transportation Allowances . The following official and those of equivalent rank as may be determined by the Department of Budget and Management are hereby granted monthly commutable representation and transportation allowances . . ." 'In a letter to this Office dated March 8, 1991, the Secretary of Budget and Management confirmed that RATA is in fact a reimbursement for the expenses incurred in the performance of one's duties rather than as an additional compensation and therefore are not compensation subject to withholding ' . . .' "Since, as shown above, there is a manifest intent to consider PERA as of the same nature as the RATA, and since the RATA has been declared by no less than the BIR as exempt from the withholding tax, it is believed that there is enough legal justification to consider PERA as exempt from the mandatory, withholding tax, notwithstanding Par. 8.0 of Budget Circular No. 4, abovequoted. "It should be stressed, in addition, that the grant of PERA is a social amelioration measure which in intended for cushion the impact of the oil price increase on the low-income government workers. As such, its liberal implementation is justified on the basis of the settled rule that social legislation's are to be liberally construed. "Furthermore, it is also a settled rule that any interpretation which would lead to absurd results should be avoided on the assumption that the legislature does not intend an absurdity. An obvious absurdity would happen if PERA were subjected to withholding tax although RATA is tax-free, when both kinds of allowances are intended as reimbursements for overhead expenses which officials and employees incur in the performance of their duties. In the case of PERA, the intended to ease the increased burden of low-income government workers who would have to shell our more pesos for their daily transportation expenses, not to mention their other necessary expenses, as a result of the oil price increases." We note that the Commissioner of Internal Revenue has not adduced any legal argument to refute our opinion. Her sole basis for seeking a reconsideration of the Presidential issuance based on the said opinion is the alleged numerous requests for refund of taxes withheld in 1991 amounting P.5 B. To our mind, this is not a sufficient basis to reconsider our opinion. Accordingly, we recommend the denial of the instant request for reconsideration of the BIR Commissioner. Very truly yours, (SGD.) FRANKLIN M. DRILON Secretary