Why OFWs should not be taxed

OVERSEAS Filipino workers (OFWs) 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 clichéd.

OFW income remittances reached 7.6 billion dollars in 2003, or 10 percent of the country's gross domestic product. This huge inflow of money has unsurprisingly caught the eye of finance policymakers in the Gloria Macapagal-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 Santo Tomas who in the past three years has engineered the cutbacks to the benefits given by the Overseas Workers Welfare Administration (OWWA), 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-dollar membership fee every time he or 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 the 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-rate salary were taxed from one to two percent a year. Former president Fidel Ramos, reacting to demands from OFWs to not be taxed, repealed the tax in 1997 with the revised Tax Code.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 revenue 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 August 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 dollars 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 where they work.

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 Santo 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, Santo 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.

Why Poe might be the Philippines' Lula

I GOT a flood of e-mail last week from readers after I suggested that opposition presidential candidate Fernando Poe Jr. deserved a second look. Most repeated the now tired mantra of Poe not being qualified to run the country because he's a high school dropout, has never been in government before, hasn't outlined a platform, and because of his links to former president Joseph Estrada and his friends.

In my responses to readers I've been pointing out to them the example of Brazil's President Luis Inacio "Lula" da Silva, who didn't even finish the eighth grade but is now successfully running the fifth largest economy in the world. The International Monetary Fund, the World Bank and Wall Street bankers have nothing but praise for Lula's handling of Brazil's economy. Lula may not have a PhD in economics like Macapagal-Arroyo, but he's managed to use his own brain and listen to the advice of expert advisers.

A once radical, leftwing union leader, Lula once scared to death many Brazilians, not least of all rich businessmen and industry tycoons, who feared Lula would turn Brazil's freewheeling capitalist economy into a moribund, state-controlled one. Like Poe, Lula suffered countless attacks on his person by the elites, who said Brazil would go to hell if an eighth-grade dropout who doesn't even speak English was elected to the highest position in land. They were, of course, dead wrong. Lula rose to the challenge and swapped his "masa" [masses] T-shirts and jeans for suits and ties, deciding to keep Brazil in its capitalist course while working doubly hard to lift the majority of Brazilians out of poverty.

I have a gut feeling that Poe could do the same if elected president. But that's a big "if." Macapagal-Arroyo, with her huge political machinery, and the millions of pesos she's pouring into winning the election (including, I must add, the OWWA funds that are supposed to be held in trust for OFWs), is determined to win the election, even if that means cheating here and there. If she does win, I don't think it will be by a wide margin, and she probably won't have a clear mandate from the Philippine electorate. Which is a shame really, as the country doesn't need six more years of wishy-washy and divisive Macapagal-Arroyo governance.

Comments or questions? E-mail me at rasheed@arabnews.com.