Highly paid OFWs may lose tax perk

BY JUDY T. GULANE, BusinessWorld Senior Reporter The Bureau of Internal Revenue is again thinking of removing the income tax perk enjoyed by overseas Filipino workers (OFWs), but only for those it says are highly paid. Internal Revenue Commissioner Jose Mario C. Buñag, in an interview, said there has been no "definite decision" on whether to push for the removal of OFWs’ income tax exemption or not. But if the plan is approved, the levy would be meted only on professionals such as bank employees and doctors "who make so much money." "If ever, factory workers and domestic workers [will retain their income tax exemption]," Mr. Buñag said. Taxing OFWs will require an amendment of the National Internal Revenue Code of 1997, which presently provides that "an individual citizen of the Philippines who is working and deriving income from abroad as an overseas contract worker is taxable only on income from sources within the Philippines." The Code further provides that Filipino seamen working in vessels "engaged exclusively in international trade" are considered overseas workers. The code does not distinguish between skilled and non-skilled workers. Before the 1997 tax reform, OFWs were subjected to income tax. Since they also paid income taxes abroad, their payments were used as credits against their liabilities in the Philippines. Mr. Buñag did not detail how the income taxation of OFWs will be carried out this time - assuming the tax bureau proceeds with the plan - saying the matter is presently under study. The Finance department, in 2004, pushed for the removal of the OFWs’ income tax exemption as one of several measures to collect more revenues for the government. Protests by OFWs and their families, however, prompted the department to withdraw the proposal from Congress. It claimed then that the now-defunct Presidential Task Force on Tax Reforms did not intend to exempt all OFWs from income tax. It said that the plan, in fact, was to tax only those earning more than $6,000 annually and to exempt the "small income" workers. The department proposed that Congress "make the high-paying overseas Filipinos, like professionals and technical workers, share in the burden of financing the public sector" by reimposing the income tax on those with annual gross incomes of at least $6,000. Around eight million Filipinos are presently working abroad, remitting a record $12.76 billion back to the Philippines in 2006. They remitted $10.69 billion in 2005. The Bangko Sentral ng Pilipinas said tje higher deployment of workers and better remittance channels accounted for the increase. The bank expects remittances to further go up to $14.7 billion this year.