MANILA, Philippines ? Malacañang is wondering why there is so much fuss over the Bureau of Internal Revenue?s proposed 5-percent tax on campaign contributions.

?The 5-percent campaign tax is within the purview of the expanded withholding tax system of the BIR which is allowed under the BIR Code and it has been in existence for about 30 years now,? Anthony Golez, deputy presidential spokesperson, said in a briefing.

However, the Commission on Elections (Comelec) contends that the BIR move needs to be studied further.

Election Commissioner Gregorio Larrazabal Thursday said that BIR representatives were told last week that they could not tax campaign donors unless the election law that exempted contributions from any form of tax was amended.

The BIR move has stirred a debate as to its timing, among others, as well as protests from the United Opposition and other political groups claiming that this was aimed at harassing them.

The BIR has proposed imposing the 5-percent withholding tax on a candidate?s declared expenses and campaign contributions so it could monitor their expenses.

Under Revenue Regulation No. 8-09, all political candidates, parties and their donors should remit a 5-percent withholding tax on their campaign expenditures and contributions.

Lorelei Fajardo, another deputy presidential spokesperson, said that the administration would comply with the BIR action.

?All candidates for that matter presenting themselves to lead the nation should comply,? Fajardo said.

BIR should clear confusion

?This not just focused on the opposition. Even the administration candidates will be taxed. So there?s no reason for anybody to say this is a strategy of the administration for the opposition candidates,? she added.

The Palace spokespersons conceded that there was some confusion and that the BIR should mount an information campaign, and even explain its mechanics to Congress.

Golez even suggested that a case could be filed with the Supreme Court to seek a clarification about this.

As far as he understood it from BIR?s explanation, Golez said that the withholding tax applied only to goods and services.

?Let us say a candidate will have to buy a shirt that will cost him or her P100. The 5 percent or the P5 out of that P100 is going to be withheld and the P95 is going to be the actual purchase price. So the 5 percent will go to BIR and the balance of P95 will go to the supplier,? he said.

?Now, the 5 percent, where will it go? In the BIR it is going to be allowed as a tax declaration on the part of the supplier of the product and when they compute for the income tax... it is allowed as a deduction or a tax credit,? he added.

Specific law required

Larrazabal said that tax officials had so far failed to satisfactorily answer questions by the Comelec.

?We?re part of the implementation. We have to look at that first,? he said.

In last week?s meeting, Larrazabal said, the Comelec discussed with BIR representatives a ?tax on expenditures, not contributions.?

?We told the BIR there?s concern because you need a specific law on that,? Larrazabal said.

On taxing expenditures, he said the BIR explained that the additional tax would be imposed on sellers or suppliers of campaign paraphernalia and services, and again ?only if they declared (the expense).?

He also found problematic BIR?s idea to compel the candidates or political parties to withhold 5 percent of what they were supposed to pay to their suppliers, and then later pay the BIR directly.

?That?s taxing the candidate, it burdens them,? he said. ?It?s not whether we are in favor or not. We told the BIR we should discuss this further. You have to look at the details first,? Larrazabal said.