NO NEED FOR NEW LAW ON CAMPAIGN TAX

NO NEED FOR NEW LAW ON CAMPAIGN TAX - GMA

MANILA, NOVEMBER 6, 2009 (STAR) By Marvin Sy - Malacañang yesterday assured politicians not to be concerned over the imposition of the campaign tax since it would not directly affect them.

Deputy presidential spokesperson Anthony Golez explained the five- percent campaign tax is not a new scheme of taxation since it has been implemented for more than 30 years.

Golez said the campaign tax is not directly imposed on the politician but on the supplier of goods and services used during the campaign period.

Simply put, Golez said the campaign tax could be likened to the withholding tax being collected by the Bureau of Internal Revenue on all business transactions.

“So the point on the five-percent withholding tax is not on the contribution but rather it is a tax on the supplier of goods and services and it is collected through the withholding tax system,” he said.

Golez said the concerns raised by the opposition candidates that the tax would be used to harass them have no basis.

Golez said the payment of taxes applies to everyone regardless of political affiliation.

“So it would not be fair to say that the opposition would be at a disadvantage because they are the ones being taxed,” Golez pointed out.

Golez called on the BIR to clarify the issue and launch an information campaign to clear up the misconceptions on the imposition of campaign taxes ahead of the election period.

“The important thing is that it is not illegal, it is not unconstitutional as what was alleged,” he said.

Election lawyer Romulo Macalintal also explained the imposition of the campaign tax is not a violation of the Constitution, as it is a tax scheme covered by the Internal Revenue Code.

Macalintal said the campaign tax is imposed on campaign expenditures. He said the tax could be considered a form of withholding tax that does not need to be subjected to legislation by Congress.

“For example if a candidate spends P100,000 for advertisement on television, he will withhold five- percent or P5,000 for (the) BIR and pay the media only P95,000 and remit P5,000 to (the) BIR. So it will have no effect on candidates,” Macalintal pointed out.

The BIR and Senate President Juan Ponce Enrile earlier said the Internal Revenue Code of 1997 already covered the tax on campaign spending.

The BIR, through Revenue Regulations No. 8-09, requires all political candidates and their supporters to set aside five percent of their campaign kitty for withholding tax.

The order also tasks political parties and their candidates to register with the BIR as “withholding agents.”

Double taxation

Some lawmakers, however, disputed the legality of the imposition of the campaign tax.

According to Quezon Rep. Danilo Suarez, the imposition of campaign tax amounts to “double taxation,” which is illegal under the Internal Revenue Code.

Suarez said if the campaign tax is collected from a donor with a legitimate source of income and who pays the correct amount of income tax, this taxpayer pays levies twice.

“He pays tax on his income from which his donation came and then pays a campaign tax,” he said.

Suarez said if the campaign levy were imposed on the suppliers of politicians, these taxpayers would also be hit by double or triple taxation since they are now subject to the 12-percent value-added tax and income tax.

He pointed out that if a donor were one with no legitimate source of earnings, he and the recipient of his money would not report the donation or contribution.

“Even big corporations and wealthy businessmen do not declare their contributions,” Suarez said.

“This thing is easier said than done. It is intended only for media mileage. The BIR should junk the idea,” he added.

Suarez, one of the taxmen in the House of Representatives, suggested that the BIR should look for other sources of revenues to shore up dwindling government income.

Presidential hopeful Sen. Benigno “Noynoy” Aquino III also expressed doubts on the fair implementation of the campaign tax. – With Aurea Calica, Sheila Crisostomo, Jess Diaz, Jose Rodel Clapano

5% CAMPAIGN TAX ILLEGAL, PARTIES SAY

(STAR) By Aurea Calica - As they build up their war chests for next year’s elections, political parties are questioning the legality of the five percent tax on campaign spending, saying Congress, not the Bureau of Internal Revenue (BIR), should have a say on the tax measure.

But as questions about the legality of the BIR move pour in, Senate President Juan Ponce Enrile said the measure has legal basis.

Enrile said the BIR order is covered by the Internal Revenue Code of 1997.

“There’s a law already… it is being implemented only now. I understand they have already published the regulations,” Enrile said.

Acting BIR chief Joel Tan-Torres earlier vowed to start strictly implementing the five percent tax.

Liberal Party campaign manager Florencio “Butch” Abad said the party would have to meet and discuss what action to take on the measure, which he described as discriminatory and impractical.

“Why is the government putting an additional burden on people who want to run for office for its dismal failure to perform the very basic function of collecting taxes?” Abad asked.

“There was no such requirement in the many years that I was involved in elections. And what would be taxed? Only cash? What about time, services, in kind donations? This will be impractical in the long run because people will just donate airtime, lend vehicles and give other non-cash donations. There are ways to avoid this,” Abad said.

“In any political exercise, people must be given as much support as possible in the exercise of democracy and promotion of political rights,” he said.

In other countries like Europe, Abad said political parties were even subsidized by the governments to make them stronger.

“You’re discouraging people to perform a vital role (in a democracy) if you do this. It’s a disincentive. The elections are the very core of democracy because this is the people’s way of voicing out their positions,” Abad said.

“You should not discriminate by taking money from political parties rather than giving them. Normally, politicians spend for themselves and there are hardly contributions especially on the local level,” he said.

“If you impose taxes for the sake of increasing state revenues, you are depriving the parties of their means to be strong with the help of those who want to support them,” Abad said.

Congress’ business

“Being a new tax, should this not have emanated from Congress and not the Bureau of Internal Revenue? Our Constitution provides that there should be no taxation without representation. Questions also abound regarding the capability of the BIR to collect this tax if implemented,” Nacionalista Party spokesman Gilbert Remulla said.

“This new tax might be a disincentive to report and pay the proper taxes,” he added.

NP standard-bearer Sen. Manuel Villar Jr., who is perceived to the biggest campaign spender so far, said he is ready to comply with the BIR ruling provided that it is within the law. “If that is within the law, then we should comply. We have to check on it. I have no problem with that,” he said.

“That (tax on campaign contribution)) is unconstitutional because all tax measures must emanate from the House of Representatives,” lawyer Adel Tamano, also of NP, said.

“The order will also discourage small donors from giving,” Tamano added. Tamano is in the NP senatorial slate.

The Nationalist People’s Coalition of billionaire businessman Eduardo “Danding” Cojuangco voiced the same concern.

“Tax measures are within the realm of Congress. That is the legislative power of Congress,” NPC spokesman and Valenzuela Rep. Rex Gatchalian said.

The BIR, through Revenue Regulations No. 8-09, requires all political candidates and their supporters to set aside five percent of their campaign kitty for withholding tax.

The order also tasks political parties and their candidates to register with the BIR as “withholding agents.”

Bias for Palace bets

For Makati City Mayor Jejomar Binay, the five percent tax would greatly hurt opposition and poorly funded candidates.

Binay, president of the United Opposition (UNO) and running mate of former President Joseph Estrada in the 2010 elections, reminded Tan-Torres that even the Commission on Elections has serious doubts over the legality and the propriety of the measure.

“Aside from questions on its legality, the campaign tax favors moneyed candidates and administration-backed candidates who have access to national government resources,” he said.

“It would also cripple the opposition since the national government would now be able to pinpoint opposition donors from the business community,” Binay said.

Binay said the business community is very aware of the vindictive nature of the present administration.

“A list of businessmen financially supporting the opposition would be heaven sent for this administration, who can then employ every trick in the book to harass and intimidate our financial backers,” Binay said.

He also said the campaign tax would give the administration a means to harass supporters of the opposition.

“Opposition donors will now be vulnerable to harassment, and will think twice about supporting those of us in the opposition,” Binay said.

“We do not envy the situation of the new BIR chief. He needs to increase revenues to address a yawning deficit caused in large part by the reckless spending of this administration. But this does not justify imposing tax measures that are legally questionable,” he said.

“The national government only needs to improve tax collection and go after smugglers if it seriously wants to improve its revenues,” Binay said.

Binay cited reports that the national government loses around P140 billion yearly to smuggling.

“If the national government wants to address the deficit decisively, it can begin by going after tax cheats and smugglers. Assuming it collects only half of these estimated losses, it can more than cover the P237.5 billion deficit from January to September this year,” Binay said.

Binay said no less than Comelec chair Jose Melo reminded the BIR that there is no law that taxes political contributions.

“As it is worded, Revenue Regulation 8-09 covers purchases of goods and services during the campaign period and all election activities of candidates, their contributors and supporters. There is a need to clarify the scope of coverage since the law exempts electoral contributions from any form of tax,” Binay said.

‘Difficult to implement’

While there is no legal impediment to the order, Enrile said it may be “very difficult” for the BIR to administer the law.

“For example, if somebody gave t-shirts, and you do not know who donated it, how will you withhold (tax) from that? Who will withhold the tax if the contributions were made anonymous? It’s not my fault if I became a beneficiary since I did not solicit it,” he said.

“The candidates will simply withhold the tax of five percent and that five percent is a creditable withholding tax. So, that will be a charge or a burden on the people putting up or supplying the outlet for the advertisement,” he added.

“The procedure is simply if the candidate places an ad, then he will withhold five percent of the payment for the ads. But this one he will deliver to the national treasury and the TV station concerned or radio station will then report that in its income statement for purposes of income taxation and include it in the gross income,” he said.

“I think some people are just bringing it out in the open to keep the administration aware that they are ever vigilant in what the administration is capable of doing to the disadvantage of the political opponent,” Executive Secretary Eduardo Ermita said of the opposition to the measure.

“But you can be very sure that the administration will not do anything illegal that will somehow mar the conduct of a honest, orderly and peaceful election in 2010,” he added.

Comelec commissioner Gregorio Larrazabal, for his part, said the tax measure could provide a mechanism for check and balance on campaign spending.

The BIR expects P1.4 billion in additional revenues from the withholding tax effort alone, but the revenues will only come from the purchases of goods and services for the campaign and election activities of candidates. – With Christina Mendez, Delon Porcalla, Jose Rodel Clapano, Sheila Crisostomo, Marvin Sy

Chief News Editor: Sol Jose Vanzi

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