Taxing OFWs?

(GMA News) - It is "foolish" and "counter-productive" to remove the tax privileges enjoyed by overseas Filipino workers (OFWs) whose remittances keep the Philippine economy afloat, according to administration senatorial candidate Michael Defensor.

The former presidential chief of staff quickly rejected the move to revive a plan first broached in 2004 to tax the remittances of Filipino professionals abroad.

The Bureau of Internal Revenue (BIR) however clarified that the proposal would not cover factory workers and domestic helpers.

"OFWs, whether lowly paid domestic helpers or construction laborers, or highly paid sailors, nurses or engineers, definitely deserve to continue to enjoy their tax-exempt benefit, insofar as their foreign-sourced earnings are concerned," Defensor stressed.

"OFWs render a huge service to the country simply by sending home their earnings. They continue to drive up domestic consumption spending as well as passive and productive local investments in dollar deposits, purchases of insurance and real estate, and highly productive micro enterprises," he said.

"Besides, OFWs and their families already get taxed indirectly when they spend for consumption or investments here," Defensor pointed out.

"When a Filipino nurse working in the U.S. comes home and buys a residential condominium unit here, Philippine taxes are paid. When the nurse sends money here that is spent at Jollibee or SM, consumption taxes get paid," he further explained.

Defensor credited the country's economic sustainability to the steadily increasing remittances of OFWs. "Instead of the peso plunging as previously warned by a group of U.P. economists, the local currency is now hovering at six-year highs," he said.

Defensor said the exceptionally strong peso has also enabled government as well as private companies to reduce their dollar-denominated obligations, thus lowering considerably the country's foreign indebtedness.

In 2004, the Department of Finance pushed a similar proposal to remove the OFWs' income tax exemption as one of several measures to collect more revenues for the government.

The DoF had to withdraw its proposal from Congress after OFWs and their families launched protest actions against it.

It claimed then that the now-defunct Presidential Task Force on Tax Reforms did not intend to exempt all OFWs from income tax. It said that the plan, in fact, was to tax only those earning more than $6,000 annually and to exempt the "small income" workers.

The department proposed that Congress "make the high-paying overseas Filipinos, like professionals and technical workers, share in the burden of financing the public sector" by re-imposing the income tax on those with annual gross incomes of at least $6,000.

The revived plan seemingly supports the recommendations of the De La Salle University's business and economics experts who conducted a study, titled, "The Economic Impacts of International Migration: A Case Study on the Philippines," to impose income tax on remittances from highly paid OFWs.