VAT on remittance fees bucked

Filipino domestic helpers in Exchange Square in Central.

The Duterte administration wants to increase the value added tax on the service fee of money transfer centers where remittances of millions of overseas Filipino workers pass through, a move that was immediately opposed by OFW groups, lawmakers and the Catholic Bishops Conference of the Philippines.

Department of Finance spokesperson Assistant Secretary Paola Alvarez said only the service fee of remittance centers and not the actual remittance will be taxed under House Bill No. 4774.

“The VAT is on service, not the remittance amount. For instance, if sending 4,000 pesos, the money transfer center charges 100 pesos, and the VAT is 12 pesos, or only 0.3 percent of the remittance amount,” Alvarez said.

Alvarez said the bill targets businesses such as pawnshops, which are initially not registered as remittance centers.

“We are cleaning up the VAT system to reduce leakages and unfair treatment. In the past, pawnshops are just pawning and don’t transfer money, but now they do, so we have to consider this new business like any other service provider,” she said.

But Bayan Muna party-list Rep. Carlos Zarate said the measure is unfair to OFWs, whose remittances from January to November last year reached $24.34 billion, up 5.2 percent from $23.14 billion during the same 11-month period in 2015.

“Our OFWs remit almost P1 trillion a year. And yet the government still wants to tax their remittances. That is additional burden for our OFWs,  no matter how small the amount,” Zarate said. “We will block this measure.”

Zarate said the government-backed measure will have an impact on domestic remittances as well.

“It seems that the DOF wants to tax everything they see,” the lawmaker added.

Ako Bicol party-list Rep. Alfredo Garbin Jr. said Congress should consider taxing individuals with higher incomes instead of OFWs.

“Those who have greater ability to pay and those who have greater income should have a bigger tax burden,” Garbin said.

The Catholic Bishops Conference of the Philippines, through its Episcopal Commission on Migrants and Itinerant People, also opposed the planned VAT increase on remittance service fees.

“The 12 percent value added tax for remittances to our OFW when they send money is senseless burden and added sufferings to them. It is not to help them but to hurt them with their earnings. What our government officials should think is uplift the condition of our OFW and not to inflict harm and another sufferings to them,” Commission chairman Balanga, Bataan Bishop Ruperto Santos said.

HB 4774 was filed by House ways and means committee chair and Quirino Rep. Dakila Cua. It contained the DOF’s proposal to lower personal income taxes, broaden the VAT base, increase excise taxes on petroleum and automobiles as well as reduce the estate and donors taxes.

Unlike the previous versions of the DOF’s tax policy reform program, HB 4774 will no longer seek to remove the VAT exemptions being enjoyed by senior citizens as well as persons with disabilities.

The measure also pushes for a tax on lottery while lowering the estate and donor’s taxes to a flat rate of 6 percent.