DOF objects to proposed tax exemption on election honoraria, allowances
FILE PHOTO: Teachers prepare the election paraphernalia they received from the Cebu City treasurer’s office and the classroom to be used as a voting precinct for the 2019 midterm elections. INQUIRER file photo / JUNJIE MENDOZA
MANILA, Philippines — The Department of Finance (DOF) on Thursday objected to the proposed tax exemption of election honoraria and allowances, citing concerns that it may trigger a “clamor” for more exemptions for similar benefits given for other rendered services.
But the chairperson of the Senate panel tackling the bills seeking for such exemption is “inclined” to endorse the proposal to the plenary, saying it is a “small show of support” to teachers rendering services beyond their original responsibilities.
During the hearing of the Senate ways and means committee chaired by Senator Pia Cayetano, Director Arvin Quiñones of the DOF’s Policy Research and Liaison Office manifested the department’s position on pending bills seeking to exempt the honoraria and allowances received by personnel, including teachers, who render services during the election period.
Quiñones said that while the DOF recognizes the objective of the measures, the department believes that tax exemptions are not the best way to ensure more benefits for those who extend their services during the elections.
“We express our objection to the proposed measures,” he said during the hearing.
“If we provide exemptions for this sector, then other sectors might clamor for the same… Then second, we believe that the tax system is not the best way to provide additional benefits for the sector,” he pointed out.
“If we want to provide them with benefits then we perhaps could push for other means, except the tax system. Because the tax system may be subject to abuse and it will be more difficult to implement if we address the benefits through the tax system,” he added.
Aside from this, Quiñones cited the country’s tax code, which defines “gross income as any income derived from any source.”
“The BIR (Bureau of Internal Revenue) has ruled before that honoraria and allowances, no matter the amount, are wealth that flow into the hands of the recipients and so should be subject to the income tax,” he added.
Further, he pointed to Republic Act No. 10963 or Tax Reform for Acceleration and Inclusion (Train) law. According to the DOF’s position paper, which was submitted to the Senate committee, the passage of the said law “already provides relief from personal income taxes since income tax rates have been adjusted.”
Quiñones, still citing the DOF’s position, said the proposed exemption runs counter to the principles of Train law in “making the tax system more efficient and equitable.”
“We believe that the more exemptions we introduce, the more difficult it is to implement and lastly, exempting one kind of activity, in this case the electoral services that our teachers provide, will be inequitable to other similar activities that provide similar kinds of benefits,” he said.
“It’s like saying na we want to prefer one service and give exemption to them to the detriment of other similarly situated benefits,” he added.
‘Unique’ situation
Cayetano, however, stressed that teachers are put in a “unique” situation because rendering services during the election period are beyond the performance of their profession.
Nevertheless, she said she understands the concern raised by the DOF that exempting election honoraria and allowance from income tax “may open a floodgate of requests for exemption for everyone.”
Meanwhile, Atty. Anne Loraine Garcia from the BIR’s law and legislative division said the bureau “generally does not support any further grant of tax exemptions or reductions through legislations as this erodes on the revenue that the national government would have otherwise collected.”
She, however, said the BIR will submit to the wisdom of Congress if lawmakers believe that the passage of the proposed exemption “will be for the best interest of the Filipino people.”
For his part, Senator Sherwin Gatchalian appealed to the DOF to “look at the plight of our teachers,” noting how they are only able to take a portion of their honoraria.
In an interview after the hearing, Cayetano said she is inclined to file a committee report endorsing the proposed tax exemption for plenary approval. This will then be subject to deliberations on the Senate floor.
“I know the hard work of teachers. Napakabigat ng additional burden na binigay natin historically sa kanila to be in charge, di nga lang to assist, talagang be in charge of election. And I think it’s a small show of support that we can do kung hindi na sila mata-tax,” she told reporters.
However, she reiterated that she understands the DOF’s position.
“Tatlong taon na rin akong WAM (ways and means) Chair na ayaw lang nila ng maraming administrative burden and then exemptions. Pero for me, hindi naman ito typical exemption kasi every 3 years lang naman mangyayari and historically, walang tax ito,” she said.
“So I am inclined to file the ComRep and the Senate is a body that decides by consensus, if majority supports it, yun ang magiging position ng Senate,” she added.
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