“Like sari-sari store owners all that the DOF sees is that the present DOF will have ‘losses’ in the near term.”
by Ducky Paredes
Among the best pieces of legislation to come out of the legislative mill is R.A.. 9505, An Act Establishing a Provident Personal Savings Plan, known as the Personal Equity and Retirement Account (PERA.)
This allows Filipino workers to save as much as P100,000 and enjoy tax exemptions off the funds’ earnings. Overseas Filipino workers are allowed to set aside as much as P200,000 and enjoy the same tax holiday. Although the Bangko Sentral has written the IRR (Implementing Rules and Regulations) for this, the Department of Finance is taking a dim view of a mechanism that would increase the individual savings of the workers and which would eventually work towards more funds being invested, thus also increasing the DOF’s tax collections.
The DOF is taking a myopic view of this. It sees only what it claims is at least P2.3 billion that will be lost if the government allows Filipino workers to benefit from the Personal Equity Retirement Account (PERA) for the remainder of the year.
According to data from Department of Finance, on a yearly basis, the pension scheme will cost the government some P7 billion in revenues. The DOF is probably right but only on the first year. Eventually, starting from year 5, when some of the investment can already be withdrawn, without penalties, the money available to be taxed will increase beyond what the DOF is now collecting.
On the other hand, the BSP is all for it. BSP Governor Amando M. Tetangco, Jr. sees that with PERA, “the opportunity to invest is made available throughout the archipelago that puts a premium on investment gains. I’m confident we can get this off the ground in by the start of next year.”
There is as much as P5 trillion in deposits sitting idle in our banks. If even only a small portion of this is transferred into PERA accounts, this will boost our financial markets, where most of the players today are foreign accounts.
PERA accounts will be offered only by local banks, mutual funds and insurance firms, which have a capitalization of at least P100 million.
Investments allowed for PERA accounts are local instruments that have been pre-approved by the BSP, SEC, and Insurance Commission.
PERA approximates the 401 (k) salary savings plan available in the United States for salaried employees and small business owners. How it works is that the invested salary or income is not taxed at the time that it is earned. Taxing is deferred for the time that the funds are withdrawn from the 401 (k) account.
Sadly the boys from the DOF cannot see this as doing any long-term good for the economy and the future DOF. Like sari-sari store owners all that the DOF sees is that the present DOF will have “losses” in the near term.
Thus, the DOF just might want to stop from ever being implemented among the best ways that will make investors out of Pinoys who are wary of banks and investing for their future. Sayang naman that we have a DOF blind to the future is in charge of our tax collections.
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Can we trust the Bureau of Internal Revenue to be apolitical?
In the 1992 elections, among the richest men in the country and on the Forbes Magazine list of the world’s richest was apparently targeted for having supported the wrong candidate against the eventual winner. This is what I wrote in 1994, when the case hade been decided on by the Court of Tax Appeals:
“In the case of Fortune Tobacco versus the Commissioner of Internal Revenue in the Court of Tax Appeals (CTA), after the cigarette company won, the government asked for reconsideration. In doing so, the government brought up nine arguments.
It argued that what was issued, as Revenue Memorandum Circular 37-93 raising the taxes on three brands produced by Fortune was a valid interpretation of the tax code and did not need to be published before it took effect. Besides, the government said when a fax was sent to Fortune on July 2,1993, that was already enough notice; there was no need for hearings since this was only an interpretation of existing law and did not fall under the category of not tax rules and regulations.
“In addition, the government said that the commissioner did not violate the rule that there must be uniformity and equality in taxation even if only Fortune’s brands were so taxed and not others similarly situated.
“The CTA noted in its October 11, 1994 decision that the government “failed to refute the fact that the petitioner was not notified beforehand of the proposed reclassification or given the chance to express its position thereon prior to its adoption despite its admitted significance and far-reaching effect not only on petitioner’s business but more so in the local tobacco industry. It was conceded that there was no such `notice’ as provided under the Administrative Code. The notice by telefax was only given after RMC No. 37-93 was approved and issued by respondent for implementation.
“Even granting that `notice’ is understood to mean notification of theissuance of RMC No. 37-93, notice by telefax still cannot be considered duenotice since it is not yet an accepted mode of service.”
“The argument that the BIR was not being unfair to Fortune since only itsbrands were affected by the interpretation was also shot down: ‘While respondent admitted that only `Hope’, `More’, and `Champion’ cigaretteswere actually reclassified by RMC No. 37-93, she reasoned out that it does not preclude the classification of other cigarettes similarly situated. Nothing can be further than the truth. With the effectivity of R.A. 7654 on July 3, 1993, respondent has no longer the authority to reclassify . . .”
“As to the Commissioner’s contention that there was no intention to applythe interpretation only to Fortune’s brands, the court wryly noted that”`Unintentional’ discrimination has no place in our jurisdiction.”
This time around, again, BIR Commissioner Sixto S. Esquivias IV announced that the newly issued Revenue Regulations No. 8-09 requires all political candidates/ parties/contributors to withhold a 5% withholding tax on their campaign expenditures and contributions.
The new regulations also require all political candidates, parties and candidates to register with the BIR as a withholding agent.
Wow! This will give the incoming BIR chief his target list of companies and individuals to tax – all those who gave more to the losers than to the winning candidate!
Besides, can the BIR do this without calling the concerned taxpayers to a hearing? Not according to the CTA.
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hvp 10.26.09
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