NAME: CATIPAY, JEFRAI D.

SECTION: BSBA-2C

SUBJECT AND SCHEDULE: BA 122 (5:30-7:00) DATE: APRIL 22,2022

CASE STUDY # 1

Attorney. Bernardo Zialcita

I. BACKGROUND AND RATIONALE

➢ In the instance of Attorney Atty. From March 13, 1962 to February 15, 1990, he worked
for the government as Zialcita. He achieved the mandatory retirement age of 65 years
the next day, on February 16, 1990. He is entitled to a commutation of his accumulated
leave credits to money value upon his compulsory retirement. Compulsory retirement
may be regarded a "reason beyond the control of the aforementioned official or
employee" under the NLRC's above-mentioned rules. As a result, the amount he
received in commutation of his accrued leave credits as a result of his mandatory
retirement, or his terminal leave pay, falls within the listed exclusions from gross
income and is thus tax-free. When a government employee chooses to come to work
rather than take time off and use up his or her vacation time, there is little doubt that
the government benefits from the person's ongoing and uninterrupted service. In
recognition of this, legislation was passed allowing retired government employees,
among others, to have their accumulated leave credits commutated. The money he
receives after retirement is a gift from the government as a thank you for continuing to
work when he might have taken a holiday. It is a simple reward granted by the
government in exchange for or in honor of good services, and it stems from the
government's gratitude and graciousness. When any officer, employee, or laborer of the
Government of the Philippines shall voluntarily resign or be separated from the service
through no fault of his own, he shall be entitled to the commutation of all accumulated
vacation and/or sick leave to his credit. Because it is paid solely upon retirement and in
acknowledgment of the retiree's excellent services, the conversion of accrued leave
credits may be deemed a retirement gratuity.
II. PROBLEM INDENTIFICATION
➢ Attorney compensations for his final leave. Zialcita got as a result of his obligatory
separation can never be deemed a portion of his wage subject to income tax, but it does
fall under the phrase other similar advantages obtained by retiring employees and
workers. They cannot anticipate all variables affecting the rights of government
employees of all categories and from various offices at this time and in all cases. Each
matter will have to be determined and decided by the relevant authorities when it
occurs. Similarly placed is a vague and indeterminate expression whose applicability
cannot be predicted ahead of time.

III. ALTERNATIVES SOLUTIONS TO THE ABOVE PROBLEM

➢ The Commissioner of Internal Revenue filed a request for clarification and/or

reconsideration with this Court as an intervenor-movant and through the Solicitor
General. The "Budgetary Reform Decree on Compensation and Position Classification
of 1976, makes it clear that the actual service is the period of time for which pay has
been received. Excluding the period covered by terminal leave. As a result, the Court
decided to order the Office of Fiscal Management and Budget to refund Attorney. They
declare that no withholding tax shall be deducted by any Office of this Court from the
terminal leave pay benefits of all retirees similarly situated, including those who have
already retired and from whose retirement benefits such withholding taxes were
deducted. Any government officer or employee who retires, voluntarily resigns, or is
separated from the service due to no fault of his own and whose leave benefits are not
covered by special law. Shall be entitled to the commutation of all accumulated
vacation and/or sick leaves to his credit, exclusive of Saturdays, Sundays, and holidays,
without litigation as to the number of days of vacation and sick leave that he may
accumulate. Terminal leave is the term for the commutation of leave credits. Terminal
leave is sought for by an officer or employee who quits, resigns, or is removed from the
service due to no fault of his own. Because an officer or employee who has already
broken his link with his employer and is no longer working applies for terminal leave,
the terminal leave pays, which is the cash value of his accrued leave credits, is no longer
compensation for services done. It cannot be considered a wage.
IV. CONCLUSION

➢ Officials and workers who retire under the Act are entitled to a commutation of any
unused vacation or sick leave credits they may have at the time of retirement, depending
on the highest rate received. The statute clearly reflects the government's gratitude for
many years of service already provided. As well as the evident purpose to reward loyal
and frequently underpaid employees after the formal connection has ended. Throughout
their working careers, all salaried workers and wage earners. Whether in the public or
private sector, are taxed to the last centavo of their earnings. Factory employees,
business executives, merchants, self-employed professionals, movie stars, fishing
magnates, bus and jeepney operators, vice lords, theater owners, and real estate lessors,
to name a few, do not share this sentiment. Even as his cost of living, age, health, and
other personal circumstances call for increasing spending. The middle or lower
employee who retires after thirty or forty years of service sees his retirement pensions
or benefits inexorably and swiftly fall in value in only a few years.

V. RECOMMENDATION

➢ Retirees, who are most deserving of compassion and who are least able to bear the
government's many duties. They should not be burdened by a strained interpretation of
the law. Retirees, who are most deserving of compassion and who are least able to bear
the government's many duties, should not be burdened by a strained interpretation of
the law. The taxing terminal leave compensation would result in the taxation of benefits
received later and as a direct result of retirement, resulting in double taxation. This
resolution also applies to those who take advantage of optional retirement and those
who resign or are separated from the military due to circumstances beyond their control.