MANILA, Philippines – Prospective candidates in the 2010 elections should register as withholding tax agents of their campaign expenses when they file their certificates of candidacy (CoC) from November 20 to December 1, an official of the Bureau of Internal Revenue said Friday.

BIR officer-in-charge Joel Tan-Torres told INQUIRER.net that the agency would establish registration centers in Commission on Election offices nationwide to receive CoCs to simplify the registration of 2010 candidates as withholding tax agents.

“In partnership with Comelec, we will place BIR registration booths in all Comelec offices that will receive the CoCs so that it will be easier for candidates to register as withholding agents. To register, a candidate can present his CoC and we will give him a copy of the necessary guidelines and forms as tax agent,” said Tan-Torres.

Specifically, the BIR booths will be located at Comelec's law department in Intramuros, Manila that will receive CoCs for national positions; the National Capital Region regional election director's office and office of the provincial election supervisor that will receive CoCs for candidates at the House of Representatives; and the city and municipal election office to receive CoCs for local positions, said Tan-Torres.

Tan-Torres said the BIR was still finalizing its proposals on the registration scheme that the agency would discuss next week with the Comelec.

Revenue Regulation No. 8-2009 issued by the BIR in October subjected “all expenditures and income payments, which are made by candidates, contributors or donors to suppliers for purposes of campaigns” to creditable withholding tax of five percent, said Tan-Torres.

The five percent campaign tax is “not imposed on contributors, donors or candidates” but on the supplier who rendered services or products for campaign, explained Tan-Torres.

“Under the new order, the candidate will become the tax agent who will pay directly to BIR the withholding taxes for campaign services rendered by a supplier. Instead of paying the supplier with an amount for the service inclusive of taxes for example P100, the candidate will pay the supplier an amount minus the five percent tax or P95. Then, the five percent tax or P5 withheld by the candidate from the supplier's income would be paid directly to BIR,” said Tan-Torres.

Once paid to BIR, the withholding tax would be subtracted via tax deductions or tax credits from the supplier's annual taxable income collected by the revenue agency every April, said Tan-Torres.

Comelec legal department director and lawyer Ferdinand Rafanan lauded the new scheme for tax collection on campaign expenses, adding “It will provide an additional paper trail to verify the campaign spending declared by candidates to the poll body.”

“When the candidate becomes the withholding tax agent of the supplier, there would be an adversarial interest between them. For him to benefit from the withheld tax, supplier would declare the contract amount for the campaign services he rendered to avail of the tax credits. When the candidate submits his campaign expenses to the legal department, we then have an additional paper trail to follow if he honestly declared his campaign expenses. We will coordinate with BIR on this,” said Rafanan in a separate interview.

Rafanan added that under-the-table fixing to evade taxes would be “more difficult” because of the paper trail of transactions reported by the supplier against the report submitted by the candidate.

Additional benefits will include monitoring which candidates will exceed the allowed amounts of campaign expenses per voter under the Fair Elections Act, said Rafanan.

Tan-Torres said the BIR would cooperate with the Comelec in cross-checking the campaign expenses of candidates with their records.