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This research aimed to understand the legality, practicality, and necessity of the five percent back wage tax claimed by the Bureau of Internal Revenue (BIR) in labor dispute awards. It is an offshoot of a roundtable discussion proceeding conducted by the Institute for Labor Studies (ILS), the research and advocacy arm of the Department of Labor and Employment (DOLE), on 27 September 2013. The research applied the mixed model approach—a combination of qualitative and quantitative techniques—in analyzing data. Specifically, the research used semi-structured interviews, content analysis through summarizing and categorization, and cost benefit analysis.

The data analyzed included legislations, judicial opinions, administrative laws, statutory construction principles, and interview responses. The research found that the five percent back wage tax may be in conflict with the Philippine Constitution’s equal protection and social justice principles. It also found that there are provisions under the National Internal Revenue Code (NIRC) that may exempt back wages from taxation. Moreover, the research discovered that back wage taxation may entail more costs than benefits and that the government may have enough funds to support its programs even in the absence of back wage taxes. Hence, the research concluded that back wage taxation may be illegal, impractical, and unnecessary. This research believes that the conclusion presents an opportunity for government policy-makers, worker organizations, and other concerned stakeholders to introduce the necessary changes to the back wage taxation practice. Such practice must essentially conform to the decent work and inclusive growth standards observed internationally and domestically.

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Title: Cost Benefit Analysis of Philippine Back Wage Taxation: Theoretical and Practical Perspectives
: Gian Paolo S. Ines