Government mulls lifting tax exemption of highly paid overseas Filipinos

Government mulls lifting tax exemption of highly paid overseas Filipinos
By Des Ferriols
The Philippine Star 12/07/2005

The government is floating the idea of lifting the tax exemptions of highly paid overseas Filipino workers (OFWs) to help generate revenues for the national coffers.

OFWs have been exempted from income and other taxes but government economists said the "top bracket" of OFWs working in "power positions" could be asked to waive their exemptions.

When asked, finance officials said the proposal was not being actively pursued at the department level but it could be studied as a possible option over the long term.

The proposed tax on OFW income, however, would still exempt majority of Filipinos working abroad and possibly cover only the top earners.

If pursued, however, taxing high-income OFWs would require an amendment of existing tax legislations and factor in the different bilateral agreements with various countries covering tax reciprocity.

But officials admitted that if discussions were even started, the proposal is likely to generate adverse public reaction unless it was explained properly.

"It would appear like a class tax," said one finance official.

According to another official, however, taxing the highest income earners working abroad should be viewed as a progressive tax policy.

Taxing OFWs has been virtually unthinkable since remittances from workers abroad have been financing the government and generating huge amounts of foreign currency for the country’s international reserves.

"The reason our workers have to go abroad for jobs is because we can not provide them with jobs here," said the source. "That is why they are exempted from taxes. But not all of them should be exempted."

One of the possibilities, according to the source, was to impose a fixed amount that would be paid only by high-income OFWs.

By "high-income, the source said this would refer to the likes of former finance secretary Jose Isidro Camacho or even famed entertainment personalities as singer Leah Salonga.

"We should not be talking about doctors or teachers or engineers who have to go abroad to get jobs," the source said.

OFW remittances have been the backbone of the Philippine economy since the rise in offshore deployment in the 1980s.

The Bangko Sentral ng Pilipinas (BSP) said the country’s dollar surplus is expected to reach $2 billion this year mostly from remittances by Filipinos working abroad.

The BSP said remittances from overseas Filipino workers (OFWs) would grow even stronger than expected, possibly reaching close to $11 billion for the whole year.

The BOP represents the sum total of the country’s transactions with the rest of the world, including debt repayments, borrowings, investments and remittances.