(STAR) By Iris C. Gonzales - Credit Suisse, a global investment bank, expects dollar remittances from overseas Filipinos to continue growing in 2008 although at a lower rate than the past years.

The bank said strong demand for overseas Filipinos in the Middle East is expected to drive the growth in remittances.

Credit Suisse noted that despite external developments, the growth of dollar remittances from Filipinos abroad has largely been the least volatile in Southeast Asia.

“We expect remittances to continue growing in 2008, albeit at a lower rate than in 2007, owing to the boom in the Middle East, which hosts the largest number of overseas Filipino workers,” Credit Suisse said in a recent report.

Remittances from overseas Filipinos coursed through banks reached $1.4 billion in December, the highest monthly level on record, latest data from the Bangko Sentral ng Pilipinas (BSP) showed.

Monthly remittances have been surpassing the billion-dollar level since May 2006. Sustained strong inflows during the year brought total remittances in 2007 to a high of $14.4 billion, exceeding the 2006 level by 13.2 percent, data further showed.

It was also higher than the forecast level of $14.3 billion. Remittances accounted for about 10 percent of nominal gross domestic product in 2007.

Robust remittance flows in 2007 was due to continued demand abroad for Filipino workers and enhanced remittance services provided by banks and non-bank remittance agents, the BSP has said.

Regarding domestic demand in the country, Credit Suisse expects the strong momentum to continue.

“The momentum in domestic demand is also due to accelerating consumption and investment and historically low credit risk premiums and local interest rate,” Credit Suisse said.

Tax exemption for OFWs pushed Monday, February 25, 2008

The country’s largest trade union asked Congress yesterday to exempt overseas Filipino workers (OFWs) from paying the 10 percent withholding tax on corporate dividends to encourage them to invest in the country.

“This is one way to consciously encourage OFWs to invest some of their savings in local equities,” said Alex Aguilar, Trade Union Congress of the Philippines spokesman.

Aguilar said last year alone, the government raked in around P12 billion in withholding taxes on a total of P120-billion worth of dividends paid by 79 listed corporations to their shareholders.

A tax exemption on dividends would greatly help OFWs and their families, who are now reeling from the depreciation of the dollar, he added.

Aguilar said the P27,000 invested by an OFW in 100 common shares of Philippine Long Distance Telephone Co. five years ago at P270 per share, is now worth P293,000 at P2,930 per share.

On top of the large capital gain of P266,000, the OFW also received P284 per share in cash dividends from PLDT since 2005, or an extra P28,400, he added.

However, Aguilar said 10 percent of the P28,400-gross dividend, or P2,840, was actually withheld at source as final tax, thus leaving the OFW with just P25,560 in net dividends.

“Without the final tax, the OFW would have netted an extra P2,840,” he said.

“Compared to the huge capital gain, the extra P2,840 is nothing much. But if you compute P2,840 as a percentage of the OFW’s original investment of just P27,000 in 2003, the P2,840 actually represents an additional 10.5 percent gain.” – Mayen Jaymalin

Chief News Editor: Sol Jose Vanzi

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