THE DEPARTMENT OF FINANCE is pushing for an “early bird discount” for corporate taxpayers who may want to advance payments for 2010 as a means to raise funds for disaster recovery.

Finance Secretary Margarito B. Teves said such a program would also help reduce the government’s borrowing needs for 2010.

“Rep. Danilo Suarez (third district of Quezon) has filed a joint resolution at the House of Representatives,” Teves said, referring to the early bird discount scheme.

He added that the DOF preferred a concurrent resolution at both chambers of Congress would hasten the process.

The finance chief explained that what he is proposing is not an “advance” in the traditional sense, but that taxpayers would be given an incentive—a discount—for paying ahead of time.

Teves said that 2009 corporate earnings could be used as basis for the advance payments.

He added that the difference with the actual 2010 dues could be credited in succeeding payments.

“For example, if a company has to pay P1 million [in taxes], the nominal payment due would be 6 percent less that amount,” Teves said.

He explained that the 6 percent, or “opportunity cost,” could translate to gains from a certain amount of capital that would be foregone because the fund would be used for another purpose.

In Teves’ example, P1 million would have earned 6 percent if this was invested, but that gain would not be realized if the money were to be used to pay taxes. Thus, the opportunity cost is 6 percent.

The finance chief expressed hope that Congress would swiftly agree on a concurrent resolution so that collection could start as early as possible.

“The advantage is, we can get cash earlier, which will help reduce the amount of borrowings,” Teves said.

Teves also noted that local governments already allow advance payments on real property tax, but Congress can come up with a resolution that has an effect of law, which will later be part of the National Internal Revenue Code.

The Suarez-sponsored Joint Resolution No. 50 proposes that the Bureau of Internal Revenue be authorized to collect 10 percent from the gross sales of all large taxpayers as advance payment of taxes in 2010 and 2011.

The resolution refers to large taxpayers such as companies engaged in the production of alcoholic beverages, tobacco, pharmaceuticals, petroleum and telecommunications.

Suarez said the proceeds would “serve as a rehabilitation fund for all the regions devastated by recent typhoons, to address the ballooning budget deficit and to prevent the government from incurring more loans.”

Teves also dispelled concerns that the advanced tax revenues would be used by the Arroyo administration for its own purposes.

“It’s a new proposal that requires a lot of thinking and consultation, but we think it’s helpful,” the finance chief said.