House panel supports travel tax exemptions for OFW dependents

The House Ways and Means Committee on Monday approved a measure extending the travel tax exemption to dependents of overseas Filipino Workers (OFW) and establishing an OFW Sovereign Fund to encourage investment.

The panel approved the Substitute bill to House Bill No. 6138, which extends coverage of the OFW travel tax exemption to dependents.

At present, Philippine nationals pay P1,620 and P2,700 travel tax for economy and first class passage, respectively, charged upon departure from the Philippines or upon purchase of the plane ticket. Already exempted from the payment of travel tax are OFWs, while their dependents are entitled to a reduced travel tax rate of P300 for economy passage and P400 for first class.

The Department of Finance (DoF) and the National Tax Research Center (NTRC), however, did not support the measure, arguing that current laws already privilege OFWs.

“We have recognized the importance or the role of the OFW in our economy. There have been a lot of laws that give them privileges,” Finance Director Juvy C. Danofrata told the panel. “Granting it or expanding it further… is not supported by the DoF, primarily because there’s already a law that gives the privilege of reduced travel tax to OFW dependents.”

She said that with the reduced tax rate in place, the government had foregone revenue of P176.76 million in 2018. This covered over 133,000 OFW dependents that benefited from the reduced travel tax in 2018.

For his part, National Tax Research Center (NTRC) Officer-in-Charge Deputy Executive Director Donaldo M. Boo said “Additional outright exemption of dependents from travel tax might be deemed too generous for the government to grant because there are already a number of laws granting OFWs certain privileges. We suggest to maintain the status quo.”

Also on Monday, the panel, led by Vice-Chair Lianda B. Bolilia of the 4^th district of Batangas, approved the tax provision of House Bill No. 6519, or the “OFW Sovereign Fund Act.”

“The proposed measure seeks to provide a safe alternative for OFWs, their immediate family members and other overseas Filipinos to invest their hard-earned income or savings through the OFW sovereign fund,” Kabayan Rep. Ron P. Salo told the panel. “This fund will be a viable income for OFWs to put their investments and to avoid being victimized by syndicates.”

If signed into law, the bill will require the Bureau of Treasury to create a separate special fund for OFWs to invest in. The proceeds of the fund will be finance “significantly urgent national government and private projects,” as directed by the President.

As for the tax provision, the Committee agreed to do away with the proposed interest income tax exemption under section 6, and adopt the concerned provisions, as approved in House Bill No. 8645, or the “Passive Income and Financial Intermediary Taxation Act.”

“We don’t express any disagreement in the possibility of making this consistent with what has already been approved by this Committee, we just don’t want it to be archived,” Mr. Salo said in response to concerns raised by the DoF and the NTRC.

House Bill No. 8645, which is the fourth package of the comprehensive tax reform program, proposed to simplify the tax regime for financial products and impose a unified 15% income tax rate on interest, dividend, and capital gains from the current zero to 30% range.

“Currently the taxation of passive income including interest on financial securities… is characterized by a complicated structure. The taxation of interest income depends on many factors like currency, issuer, residency of the income earner, so that’s what we want to rationalize or to reform under Package 4,” NTRC OIC-Executive Director Boo said.

“We don’t want to be inconsistent with such measure. We suggest the status quo be maintained for the meantime, while we’re pushing for the reforms.”

This article originally appeared on: https://www.bworldonline.com/house-panel-supports-travel-tax-exemptions-for-ofw-dependents/