Arroyo asked: Don’t veto OFW tax scrap

MANILA, Philippines—The Trade Union Congress of the Philippines (TUCP) has assailed the Department of Finance (DoF) for asking President Gloria Macapagal-Arroyo to veto a provision in the proposed new Migrant Workers Act that exempts the money wired home by overseas Filipino laborers from the documentary stamp tax (DST).

“Malacañang should reject outright the DoF’s foolish and contemptible request,” said TUCP secretary general and former Senator Ernesto Herrera.

Herrera, former chairman of the Senate committee on labor, employment, and human resources development, has been pushing for the abolition of the DST on remittances, which he said has been a burden to overseas Filipino workers (OFWs) and their families here.

A provision in the proposed new Migrant Workers Act, ratified by both the Senate and the House on January 18, excludes the cash sent home by OFWs from getting slapped the DST.

The removal of the DST on the money wired home by OFWs would help drive down oppressive remittance charges, and put extra cash in the pockets of many households, according to Herrera.

At present, under the Tax Code, all money transfers from abroad and payable in the Philippines, including those wired home by OFWs, are subject to the DST at a rate of P0.30 for every P200.

This means that OFWs pay a DST of P34.60 for every $500 or P23,065 (at $1:P46.13) that they send home. This is on top of the usual foreign and local bank fees, plus the P0.50 to a dollar margin that domestic banks are allowed when they pay out the remittance in pesos.

On the $17.348 billion (P800.263 billion at $1:P46.13) sent home by OFWs in 2009 via the banking system alone, Herrera estimates that the Bureau of Internal Revenue (BIR) collected a total DST of at least P1.2 billion.

“This year, assuming annual remittances grow by 10 percent to $19 billion, the BIR will be raking in another P1.3 billion in DST from OFWs,” Herrera said.

“This question really is, whether the P1.2 billion or P1.3 billion is better kept in the government’s pocket, or in the pockets of the families here of our OFWs. We say abolish the DST on the money transfers made by our OFWs, and let their families here keep the extra cash for them to spend,” Herrera said.

A previous study by the World Bank showed that OFWs spend up to $22 to send home $500, or as much as $14 to remit $200.

The proposed new Migrant Workers Act requires, among others, minimum compulsory insurance coverage for agency-hired employees, including benefits of $15,000 for accidental death, $10,000 for natural death, and $7,500 for permanent total disability, at no cost to the laborer.

Migrants groups, recruiters, and even government officials have opposed the compulsory insurance coverage. Aside from covering only a quarter of all OFWs, the measure would free unscrupulous recruiters from liability. The estimated 25 percent of OFWs to be covered by this provision constitute the new hires; the rest are re-hires who do not usually go through recruiters ,and are therefore exempt from the more stringent rules on overseas employment.