Jaime Soriano et al v Secretary of Finance and the CIR that employees may receive from employers pursuant to their

yers pursuant to their employeremployee

[G.R. No. 184450, January 24, 2017, C.J. Sereno, En Bank]
WON Sections 1 and 3 of RR 10-2008 are consistent with the law in declaring
that an MWE who receives other benefits in excess of the statutory limit of
P30,000 is no longer entitled to the exemption provided by R.A. 9504, is
consistent with the law. – NO
relationship, such as bonuses and other benefits. These are either mandated by law
(such as the 13th month pay) or granted upon the employer's prerogative or are
pursuant to collective bargaining agreements (as productivity incentives). These items
were not changed by R.A. 9504.

Nowhere in the above provisions of R.A. 9504 would one 􀁇nd the quali􀁇cations
prescribed by the assailed provisions of RR 10-2008. The provisions of the law are
clear and precise; they leave no room for interpretation — they do not provide or
require any other qualification as to who are MWEs.

To be exempt, one must be an MWE, a term that is clearly de􀁇ned. Section 22(HH)
says he/she must be one who is paid the statutory minimum wage if he/she works in
the private sector, or not more than the statutory minimum wage in the nonagricultural
sector where he/she is assigned, if he/she is a government employee. Thus, one is
either an MWE or he/she is not. Simply put, MWE is the status acquired upon passing
the litmus test — whether one receives wages not exceeding the prescribed minimum
wage.

R.A. 9504 is explicit as to the coverage of the exemption: the wages that are not in
excess of the minimum wage as determined by the wage boards, including the
corresponding holiday, overtime, night differential and hazard pays.

In other words, the law exempts from income taxation the most basic compensation
an employee receives — the amount afforded to the lowest paid employees by the
mandate of law. In a way, the legislature grants to these lowest paid employees
additional income by no longer demanding from them a contribution for the operations
of government. This is the essence of R.A. 9504 as a social legislation. The
government, by way of the tax exemption, affords increased purchasing power to this
sector of the working class.

"Taxable income" is defined as follows: SEC. 31. Taxable Income Defined. — The
term taxable income means t h e pertinent items of gross income speci􀁇ed in this
Code, less the deductions and/or personal and additional exemptions, if any,
authorized for such types of income by this Code or other special laws.

A careful reading of these provisions will show at least two distinct groups of items of
compensation. On one hand are those that are further exempted from tax by R.A.
9504; on the other hand are items of compensation that R.A. 9504 does not amend
and are thus unchanged and in no need to be disturbed.

First are the different items of compensation subject to tax prior to R.A. 9504. These
are included in the pertinent items of gross income in Section 31. "Gross income" in
Section 32 includes, among many other items, "compensation for services in
whatever form paid, including, but not limited to salaries, wages, commissions, and
similar items." R.A. 9504 particularly exempts the minimum wage and its incidents; it
does not provide exemption for the many other forms of compensation.

Second are the other items of income that, prior to R.A. 9504, were excluded from
gross income and were therefore not subject to tax. Among these are other payments