By: Lor Jay L. Basbas
Overseas Filipino Workers (OFWs) plays an important role towards the Philippine Economy, as 8.9% (as of 2021) of the total Gross Domestic Product (GDP) of the Philippines came from the OFWs’ remittances, hence considered as one of the countries that benefits from the remittances, together with India, Pakistan, China, and Mexico.
However, despite them working beyond the Philippines, do the OFWs remittances are subjected to taxation in the Philippines? The answer for that is NO! According to Memorandum No. 1-2011 of Bureau of International Revenue (BIR), OFWs were exempted from paying INCOME TAX.
Meanwhile, as their remittances were sent to their families and used to avail products and services in the market, which is automatically taxed by the government, therefore, its first taxation flow starts from the households. Different types of taxation policies were implemented, the most common in the market was the Value Added Tax (VAT), which is a 12% uniform rate tax that was based on the selling price of the goods and services. But some products in the market were exempted from VAT like the medicines for cancer, mental illness, tuberculosis and kidney diseases. Additionally, R. A. 10963 or Tax Reform for Acceleration and Inclusion Law (Train Law) was also signed in the year 2017, to enhance the progressivity of the tax system to promote development.
In the case of a family who has an OFW member, owns a business in the Philippines or buys a property, is it subjected to tax? Sadly, YES… The only exemption for the income tax were the remittances an OFW sent to their family. Once the remittance was used to start a business, or owned a property, therefore it was already subjected to be taxed.
The government also has other exempt taxes to be paid by OFWs. Republic Act No. 8042 (R.A. 8042 ) or the “Migrants Workers and Overseas Filipino Act of 1995”, amended by Sec 22 of R.A. 10022 states that all migrant workers were subjected to be exempted on paying travel tax, together with airport fee, upon providing documents for entitlement issued by the concerned government agency.
Regardless of the exemptions, it was very clear that OFWs indirectly pay taxes through the VAT and other taxation policies implemented by the government towards the properties or businesses they owned. Therefore, it is for us to know where the government invests the taxes being collected, not only from the families of the OFWs but also from all the Filipinos.
There are alot of areas where the government uses the taxes being collected. First, the taxes being collected were used by the government to pay its employees and the officials. Second, taxes were used to fund government projects and development plans which were used to provide subsidies, aid affected areas during calamities, national security, and other related factors.
But, how can we assess if the taxes were invested in the right areas? Two assessment tips can be use:
- Are the government officials and employees doing their jobs designated to do?
Most of the problem being encountered was the government official or employees were not doing enough or delivering their expected job performances. Despite OFWs not being taxed for their incomes, they still have the right to expect or demand performances from the government officials and employees as their remittances was used by their families to buy products and services which were taxed by the government. As OFWs also, they were also affected towards poor performances of the government, as this reflects towards the international performance of the country. Additionally, if the government officials and employees do not perform well, therefore their families are affected towards the deficient management of the society. The role of the officials was to formulate plans and projects that intertwined the demand of the society and the ideas of the officials and employees. Hence, the government officials and employees are the one who hold the direction of the society, as they have the responsibility of leading it to success.
- Are the projects and development plans sustainable, beneficial for short term and long term run, efficient, and addresses the problems needed to be solved?
Projects and development plans were presented to benefit the society. However, there are some plans and projects that were unnecessary, but as being viewed as essential, therefore it is being pushed. As an OFW, how do you want to view the Philippines once you retire? Are the projects and development plans being presented were beneficial for your family today, and for you in the future? Does the project or plan being presented now can still accommodate you once you retire? Does it address what I think is the problem of my family now living in the Philippines? Is it something that will benefit me as an OFW, my family as living in the Philippines, and the other sectors of my country?
Given these questions, as the one who contribute to country’s GDP and the families being tax from their availed products and services, together with properties and business owned, it is your responsibility to assess the projects and development plans, in order to ensure that your taxes was being used or invested in something that your family will benefit from the present, and for you in the future.
Given these assessment tips, as an OFW who was a great contributor towards the Philippine Economy, they have the right to know, clarify, assess, and evaluate the projects and development plans being presented, especially to be informed towards the flow of their taxation. Furthermore, despite being exempted from income tax, their remittances were used by their families left in the Philippines for their living, like buying foods, paying the bills, and others which were subject to be taxed. Therefore, their problems, demands, and needs should also be heard to build a better community.
References
Caraballo, M. U. (2022, February 15). OFW remittances hit record-breaking $34B in 2021– BSP. The Manila Times. https://www.manilatimes.net/2022/02/15/news/ofw-remittances-hit-record-breaking-34b-in-2021-bsp/1833127
Bureau of Internal Revenue. (2011, February 24). Revenue Regulations No. 1-2011. https://www.bir.gov.ph/images/bir_files/old_files/pdf/56432RR%201-2011.pdf