Money sent home from Filipino workers abroad will continue to enjoy tax exemption, despite a proposal to impose value-added tax on money transfer fees under the tax reform program.
Senator Juan Edgardo Angara said Tuesday the imposition of value-added tax on services fees of money transfer centers would not cover actual remittances.
“We want to make it clear to OFWs that their remittances to their families in the Philippines will not be taxed. We will make it sure not to add to the burdens of our OFWs,” Angara, chairman of the Senate ways and means committee, said in a hearing at the Senate.
Finance Undersecretary Karl Kendrick Chua said only the service fee of domestic remittances and not the actual remittance would be taxed with 12-percent VAT under the proposal.
“Our jurisdiction is only domestic transfers,” Chua said.
He said in the case of a P5,000 remittance within Metro Manila where the money transfer center was charging P125, the VAT would be only P15 collected from the center.
The Finance Department said the proposed measure would target businesses such as pawnshops, which were not initially registered as remittance centers.
Angara recognized the significant contribution of OFWs in the economy. Remittances account for around 10 percent of GDP annually.
Latest data from Bangko Sentral ng Pilipinas showed that OFW cash remittances reached a record $26.9 billion or more than P1 trillion last year, which accounted for 9.8 percent of the gross domestic product.
Angara said OFWs were working hard just to send money to their loved ones in the Philippines. He said it would be unfair if their remittances would be taxed by the government. Angara earlier sponsored a law that raised the tax exemption cap of balikbayan boxes.
The lawmaker said OFW remittances were also exempted from paying documentary stamp tax pursuant to Republic Act 10022 or the amended migrant workers law.
Package 1 of the Duterte administration’s comprehensive tax reform program seeks to lower personal income tax rates and to adjust excise taxes of petroleum products and automobiles.