House pursues tax break proposal
11/04/2008 | 02:15 AM
MANILA, Philippines - The House of Representatives appears on track to passing a measure giving more tax exemptions and tax breaks to the public, despite a Finance department warning that the move would lead to billions in forgone state revenues.
The chamber approved House Bill 5210 on second reading before it went on a break on October 11. The bill, however, is not one of four measures comprising a "Calendar of Unfinished Business" that House Speaker Prospero C. Nograles singled out for approval before a December 20 recess.
HB 5210, which substitutes 25 bills, gives an income tax exemption to local water districts and electric cooperatives registered with the Cooperative Development Authority or the National Electrification Administration.
It also amends the Tax Code to allow donors to deduct up to 60% of the value of their donations from their gross income.
A value-added tax (VAT) exemption will also go to senior citizens and the measure also lifts the VAT on power sold to poor or "lifeline" consumers, power lost to pilferage, power sold by electric cooperatives, and on the lifeline subsidy charge paid by non-lifeline consumers.
The ways and means committee, which approved the bill before it was brought to the plenary for second reading approval, said in a report that local water districts should be exempted from income tax since they are "performing essential government functions." An exemption for electric cooperatives, meanwhile, aims "to effectively decrease the rate of power especially in the countryside."
But for Ma. Lourdes B. Recente, Finance director for research and information, "Local water districts are government-owned and controlled corporations (GOCCs) according to the courts. As GOCCs, they should be subject to tax."
"The Bureau of Internal Revenue has an assessment they have P322 million in unpaid taxes from 2006 to 2008."
The Tax Code mandates all GOCCs to pay income tax except for the Government Service Insurance System, Social Security System, Philippine Health Insurance Corp. and Philippine Charity Sweepstakes Office.
"On electric cooperatives, we think (the exemption) is not necessary since they are given tax exemptions under the Cooperative Code," Ms. Recente added.
Antique Rep. Exequiel B. Javier, ways and means committee chairman, was not immediately available for comment.
Meanwhile, in a bid to "encourage private sector to donate or contribute during natural calamities," the bill allows self-employed individuals, professionals, partnerships and corporations to deduct up to 60% of their cash donations or the acquisition cost of their donation from their gross income.
However, they must show a receipt from the non-government organization, charitable group or government agency receiving the donation before they can claim any deductions.
"Donations or contributions shall be deductible only in the taxable year in which the donations or contributions were made," the bill states.
Ms. Recente said the Finance department does not oppose this provision. "Donations are already considered deductible expense," she noted.
The VAT exemptions, approved by the ways and means committee on September 3, are intended to shield the public from the impact of rising consumer prices.
Specifically, the bills lifts the VAT on electricity sold to "marginal consumers" or those whose monthly consumption is less than 100 kilowatt-hours as well as the systems loss charge on the sale of electricity by generation, transmission and distribution companies.
The committee report states that the VAT on systems losses on the sale of electricity "unduly burdens consumers especially the marginalized ones" while the imposition of VAT on electricity sold "reduces the effective discount they originally enjoyed." — BusinessWorld
The chamber approved House Bill 5210 on second reading before it went on a break on October 11. The bill, however, is not one of four measures comprising a "Calendar of Unfinished Business" that House Speaker Prospero C. Nograles singled out for approval before a December 20 recess.
HB 5210, which substitutes 25 bills, gives an income tax exemption to local water districts and electric cooperatives registered with the Cooperative Development Authority or the National Electrification Administration.
It also amends the Tax Code to allow donors to deduct up to 60% of the value of their donations from their gross income.
A value-added tax (VAT) exemption will also go to senior citizens and the measure also lifts the VAT on power sold to poor or "lifeline" consumers, power lost to pilferage, power sold by electric cooperatives, and on the lifeline subsidy charge paid by non-lifeline consumers.
The ways and means committee, which approved the bill before it was brought to the plenary for second reading approval, said in a report that local water districts should be exempted from income tax since they are "performing essential government functions." An exemption for electric cooperatives, meanwhile, aims "to effectively decrease the rate of power especially in the countryside."
But for Ma. Lourdes B. Recente, Finance director for research and information, "Local water districts are government-owned and controlled corporations (GOCCs) according to the courts. As GOCCs, they should be subject to tax."
"The Bureau of Internal Revenue has an assessment they have P322 million in unpaid taxes from 2006 to 2008."
The Tax Code mandates all GOCCs to pay income tax except for the Government Service Insurance System, Social Security System, Philippine Health Insurance Corp. and Philippine Charity Sweepstakes Office.
"On electric cooperatives, we think (the exemption) is not necessary since they are given tax exemptions under the Cooperative Code," Ms. Recente added.
Antique Rep. Exequiel B. Javier, ways and means committee chairman, was not immediately available for comment.
Meanwhile, in a bid to "encourage private sector to donate or contribute during natural calamities," the bill allows self-employed individuals, professionals, partnerships and corporations to deduct up to 60% of their cash donations or the acquisition cost of their donation from their gross income.
However, they must show a receipt from the non-government organization, charitable group or government agency receiving the donation before they can claim any deductions.
"Donations or contributions shall be deductible only in the taxable year in which the donations or contributions were made," the bill states.
Ms. Recente said the Finance department does not oppose this provision. "Donations are already considered deductible expense," she noted.
The VAT exemptions, approved by the ways and means committee on September 3, are intended to shield the public from the impact of rising consumer prices.
Specifically, the bills lifts the VAT on electricity sold to "marginal consumers" or those whose monthly consumption is less than 100 kilowatt-hours as well as the systems loss charge on the sale of electricity by generation, transmission and distribution companies.
The committee report states that the VAT on systems losses on the sale of electricity "unduly burdens consumers especially the marginalized ones" while the imposition of VAT on electricity sold "reduces the effective discount they originally enjoyed." — BusinessWorld
