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Why Overseas Filipino Workers Should Not Be Taxed
Rasheed Abou-Alsamh, Arab News

JEDDAH, 30 April 2004 — Overseas Filipino Workers have always been seen as the milking cows of whoever is in power in the Philippines. With their huge remittances keeping the Philippine economy afloat, paying homage to them as the unsung heroes of the land has become so commonplace as to now sound insincere and cliché.

OFW remittances hit $7.6 billion in 2003, or 10 percent of the country’s GDP. This huge inflow of money has unsurprisingly caught the eye of finance policymakers in the Arroyo administration, who are desperate to find new sources of income tax revenue to make up for the millions of Filipinos who manage to pay little or even no tax every year. It is ironic that at the very same time that OFWs are being viewed as a new source of income for the Philippine government, services rendered to OFWs such as Medicare and housing loans are being scaled back. In fact, it was Labor Secretary Patricia Sto. Tomas who in the past three years has engineered the cutbacks to the Overseas Workers’ Welfare Administrations (OWWA) benefits, limiting services given to OFWs and their families, especially after an OFW returns to the Philippines. This was done in the name of cost-cutting, even though each OFW is forced to pay OWWA a mandatory $25 membership fee each time he/she goes abroad to work. What this means in real terms is that when OFWs return home with say cancer, which requires expensive and lengthy treatment, they are being denied treatment because OWWA is refusing to shoulder the costs. Where is the justice in that?!

It is the National Tax Research Center (NTRC), under the Department of Finance, that came up with the hare-brained idea that OFWs who earn high salaries abroad should be taxed again. Until 1997, OFWs who made more than a minimum salary were taxed from 1-2 percent a year. Former President Fidel Ramos, reacting to demands from OFWs for exemption, repealed the tax in 1997 with the revised tax code.

Deputy Commissioner Kim Henares of the Bureau of Internal Revenue (BIR) claims that the OFW-tax exemption caused a drop in the bureau’s collection. How large the drop was is not being said, but it was obviously enough to make the NTRC propose that OFWs be taxed again.

I must admit that I haven’t read the NTRC’s proposal as I couldn’t find a copy of it. I visited the NTRC website at www.ecommunity.ncc.gov.ph/ntrc but found nothing there, the website having been last updated on Aug. 29, 2003. In fact the only information I found said that the NTRC was founded in 1972 by presidential decree, and that its mission is to “promote a tax system that will ensure a fair distribution of the tax burden among the Filipino taxpayers. We are committed to recommend necessary improvements in the tax system by conducting continuing quality research on taxation.”

What is fair about taxing OFWs? They suffer depression, culture shock and many times abuse, financial, mental or even physical, at the hands of unscrupulous foreign employers. The vast majority of OFWs earn less than $1,000 a month, the high earning engineers and ship captains being only a small portion of all OFWs. Why should OFWs pay taxes on income earned abroad, when they are not living in the Philippines to benefit from government services? Most countries exempt their citizens from income tax if they live abroad, and many OFWs are already being taxed in the countries that they work in.

Too many OFWs I know have been voting for President Gloria Macapagal Arroyo in this election, which is a shame really when her administration has tried the hardest to rollback and hack away at benefits given to OFWs. Not only that, but Labor Secretary Sto. Tomas has been instrumental in stopping wage increases for workers in the Philippines by insisting that only regional wage boards can set minimum wages. Already, Sto. Tomas has announced that there will be no wage increase on May 1, with workers having to content themselves with balloons and buntings on Labor Day. What a joke! What a shame.

Originally posted in http://www.arabnews.com/?page=7&section=0&article=44096&d=30&m=4&y=2004

 

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