MANILA, 1 May 2004 — Philippine Foreign Affairs Secretary Delia Domingo Albert yesterday sought to defuse growing criticisms against the Arroyo government over a proposal to reimpose taxes on Filipinos abroad.
“There are no plans to re-impose income taxes on overseas Filipinos. There are no plans to amend the Tax Reform Act of 1997, or Republic Act 8424, which enshrines the decision to exempt overseas Filipinos from paying income taxes,” Secretary Albert said in a press statement.
She pointed out that contrary to fears raised, “our government has in fact been exerting every effort to ease the monetary burden on our overseas Filipinos.”
In fact, she said, through the effort of the Philippine Embassy in Washington and through the personal diplomacy of President Gloria Macapagal Arroyo, the government was able to sign last year an agreement with the US that reduces the costs of remittances to the Philippines.
She said the agreement meant a savings of at least $500 million to $1 billion a year for Filipinos in the United States.
“We have also obtained a five-year grant from the USAID worth $3.75 million to promote the use of credit unions in remittances. Because of the wider reach of credit unions in the Philippines, especially in places where banks are not present, remittances will also have a wider reach but at a lower cost,” Secretary Albert said.
President Arroyo’s administration came under fire after an official of the Bureau of Internal Revenue (BIR), one of the government’s two main revenue collection arms, floated the idea of reimposing taxes on the incomes of those earning well abroad.
Vice President Teofisto Guingona Jr. and Sen. Manuel Villar, chair of the Senate’s Foreign Relations Committee, also took the cudgels for migrant workers.
Guingona said it was unfair for the government to “prey” upon an “energetic force” in the economy “while our revenue collecting agencies remain inefficient in their tax collection efforts.”
Villar said the government should not make “milking cows” of OFWs and should not look for “quick-fix solutions to serious fiscal problems.”
OFWs earning more than $1,000 a month used to pay taxes ranging from one to two percent to the Philippine government. In 1998, the revised Tax Code exempted them from taxes on income earned abroad. Congress said the exemption was in recognition of the huge contributions of overseas Filipinos to the economy.
As explained by Secretary Albert, “This decision to exempt overseas Filipinos was based on our policy of not placing a double burden on our overseas Filipinos through double taxation. We usually implement this policy through bilateral avoidance of taxation agreements, but we wanted to relieve our overseas Filipinos of this double burden across the board, without having to wait for a bilateral agreement with each host country.”
“The fact is that most overseas Filipinos are taxed in their host countries, and the double taxation that they suffered for many years before RA 8424 had cut deeply into their income.” she added.
She also commended overseas Filipinos who, for their “sense of civic and family duty as well as their love of country,” are reinvesting their income in the Philippines through regular remittances. She said such remittances have helped drive economic growth and increase household savings in the Philippines.
According to the Bangko Sentral ng Pilipinas, or central bank, overseas Filipinos remitted some $6.5 billion to the Philippines last year. The figure does not include those sent home through underground door-to-door services or through colleagues and friends.
