Senate to fast track bill exempting housing agency from taxes

MANILA, Philippines - The Senate will fast track the approval of a measure to strengthen the state’s home lending program through fiscal perks for the housing agency and benefits given to its members. Senator Edgardo J. Angara, chairman of the committee on banks, financial institutions and currencies, said the chamber has calendared for plenary approval a measure that will amend Presidential Decree (PD) 1752 — the Home Development Mutual Fund (HDMF) or Pag-IBIG Fund charter when sessions resume in January. Mr. Angara has recommended the bill’s approval before Congress adjourned on Dec. 17 for the month-long Christmas break. Sessions will resume Jan. 19. A similar bill has been approved by the House committee on ways and means in July and is also pending approval on second reading. Senate Bill (SB) 2971 seeks exemption privileges on tax, assessment, fees, Customs or import duty for HDMF’s assets and properties, including collected contributions, accruals, income, investment earnings, supplies, equipment, papers or documents. In addition, all benefit payments made by the agency will be exempt from taxes, fees and charges and will not be liable to attachments, levy or seizure. The bill grants HDMF’s board of trustees the power to set contribution rates and adopt a compensation plan for employees comparable to that of the private sector. A creation of the Marcos administration in 1980, HDMF is a mutual provident savings system originally meant only for state employees, whose contributions are invested primarily into housing. In June 1994, Republic Act 7742 was signed into law that extended mandatory coverage of the provident fund to private sector workers and other earning groups. The fund was exempted from all kind of taxes under PD 1752, but this exemption was lifted under Executive Order 93 signed by President Corazon C. Aquino in 1987. The proposed tax break will ease the impact of the global financial crisis expected in 2009. “[Changes to] the Pag-IBIG Fund law is one of the twin measures we are trying to institute in response to the economic slowdown brought about by the financial crisis," Mr. Angara said. The other measure is the proposed higher deposit insurance coverage of P500,000 from the current P250,000, which was snagged in conference committee due to some conflicting provisions between the Senate and House of Representatives versions. During the House ways and means committee deliberations on the tax perks, Romero S. Quimbo, Pag-IBIG president and chief executive officer, noted that to facilitate its mandate to address the shelter lack, the agency has been receiving tax subsidy from the Department of Finance for the past seven years. These have freed up funds that have been re-channeled to housing programs. He said the Finance department “has been kind enough to actually grant us tax subsidy in complete recognition of the fact that the taxes we pay are better off being remobilized back into housing." Mr. Quimbo said the proposed tax break would “dramatically" increase members’ annual dividends. He added had the exemption been availed of in 2007, the computation of dividends would have been based on earnings worth P9.4 billion from only P7.4 billion. He noted the fund is practically double-taxed since its contributors are ordinary workers whose income is also being taxed. “So it really amounts to double taxation more than anything else." While the Bureau of Internal Revenue has opposed exempting HDMF from corporate income tax so as not to erode revenue collection efforts, its mother unit, the Department of Finance, said in a position paper submitted to the ways and means committee that the tax exemption would enhance the housing agency’s capability to declare dividends. “We acknowledge the right of every citizen to a decent home and sufficient shelter by providing housing through mobilization of funds for shelter finance. Notwithstanding other national economic benefits, we can derive from a stronger housing sector and integrated nationwide provident savings system," said Mr. Angara. — Bernard U. Allauigan, BusinessWorld