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Taxing OFW remittances is 'foolish' - Defensor


It is "foolish" and "counter-productive" to remove the tax privileges enjoyed by overseas Filipino workers (OFWs) whose remittances keep the Philippine economy afloat, according to administration senatorial candidate Michael Defensor. The former presidential chief of staff quickly rejected the move to revive a plan first broached in 2004 to tax the remittances of Filipino professionals abroad. The Bureau of Internal Revenue (BIR) however clarified that the proposal would not cover factory workers and domestic helpers. "OFWs, whether lowly paid domestic helpers or construction laborers, or highly paid sailors, nurses or engineers, definitely deserve to continue to enjoy their tax-exempt benefit, insofar as their foreign-sourced earnings are concerned," Defensor stressed. "OFWs render a huge service to the country simply by sending home their earnings. They continue to drive up domestic consumption spending as well as passive and productive local investments in dollar deposits, purchases of insurance and real estate, and highly productive micro enterprises," he said. "Besides, OFWs and their families already get taxed indirectly when they spend for consumption or investments here," Defensor pointed out. "When a Filipino nurse working in the U.S. comes home and buys a residential condominium unit here, Philippine taxes are paid. When the nurse sends money here that is spent at Jollibee or SM, consumption taxes get paid," he further explained. Defensor credited the country’s economic sustainability to the steadily increasing remittances of OFWs. "Instead of the peso plunging as previously warned by a group of U.P. economists, the local currency is now hovering at six-year highs," he said. Defensor said the exceptionally strong peso has also enabled government as well as private companies to reduce their dollar-denominated obligations, thus lowering considerably the country's foreign indebtedness. In 2004, the Department of Finance pushed a similar proposal to remove the OFWs’ income tax exemption as one of several measures to collect more revenues for the government. The DoF had to withdraw its proposal from Congress after OFWs and their families launched protest actions against it. 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 re-imposing the income tax on those with annual gross incomes of at least $6,000. The revived plan seemingly supports the recommendations of the De La Salle University’s business and economics experts who conducted a study, titled, “The Economic Impacts of International Migration: A Case Study on the Philippines," to impose income tax on remittances from highly paid OFWs. The study done by Tereso Tullao, Michael Angelo Cortez and Edward See said taxing the remittances of Filipino professionals from abroad would help reduce the economic ills of overseas deployment has generated. “Such a move can arrest the possible hollowing effects on industries and mitigate the loss in international competition," the group said. Internal Revenue Commissioner Jose Mario C. Buñag, however said in an interview that there has been no "definite decision" on whether to push for the removal of OFWs’ income tax exemption or not, according to a BusinessWorld report. In the event the plan is approved, the tax would cover only professionals such as bank employees and doctors "who make so much money." 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 report noted. 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. The government has documented around eight million Filipinos 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 the 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. - GMANews.TV

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