Tax plan excludes OFWs

The proposed comprehensive tax reform program (CTRP) does not cover remittances from overseas Filipino workers (OFWs) since these are money coming from outside the country, according to the Department of Finance.

Finance Undersecretary Karl Kendrick Chua yesterday clarified that the Philippine government had no jurisdiction over such inbound funds.

Chua has told relevant committees at the Senate and House of Representatives that laws apply only to remittances sent from within the country and, even then, the principal amount itself is not taxed.

He said the value-added tax (VAT) slapped on domestic remittances are applied to fees charged by remittance companies.

“We have to distinguish between the foreign and the domestic remittances. Those coming from abroad are not within our tax regime, so that is not [covered] (under the CTRP),” Chua said.

He pointed out that under existing tax laws, transfer fees for domestic remittances have long been subject to VAT but have not been fully collected by the Bureau of Internal Revenue (BIR).

Chua said that, to plug this loophole, legal and tax experts agreed that transfer fees be subject to the VAT because these were not explicitly exempted from VAT under the National Internal Revenue Code.

“The [money] transfers are being done in any kind of businesses like pawnshops, which used to be only pawning. Now, they are also into money transferring,” he said.

“This is the gray area or loophole that we are correcting. But we were advised by the BIR to just clarify it through a regulation,” he added.

Earlier, Finance Secretary Carlos Dominguez III said the CTRP was expected to help reduce the poverty rate in the Philippines from 21.6 percent in 2015 to 14 percent by 2022.

Dominguez said that meant lifting some six million Filipinos out of poverty and helping the country achieve upper middle-income status.

The finance chief said that achieving this higher income status would need raising the country’s per capita gross national income from $3,550 in 2015 to at least $5,000 by 2022—about what Thailand has right now.