Senate OKs add’l income tax breaks

MANILA, Philippines - The Senate has approved on third and final reading a bill granting qualified taxpayers additional deductions in their income tax.

Senate Bill 2855, which was approved by the Senate with a vote of 14-0, aims to provide additional relief to families, particularly taxpayers who carry the responsibility of looking after their children, parents, and even persons with disabilities by reducing their tax burden.

Section 35, paragraph B of the National Internal Revenue Code of 1997, as amended by Republic Act 9504, would be amended further with the removal of the four-dependent limit that a taxpayer may claim for deductions.

Sen. Ralph Recto said under the present Tax Code, a maximum of four qualified dependents may be claimed by taxpayers as additional exemption at P25,000 per dependent.

“This cap on the number of dependents was established in 1973 under Presidential Decree 69. At the time, in addition to generating more revenues, the government was bent on promoting family planning that, in effect, encourages the number of children for each family to only four,” Recto said.

By removing the limit, Recto said it would neither have any bearing on the decision of couples to have children nor create much of an impact on the revenue take of the government.

“In other words, a couple is not motivated to bear children simply because they can include them as dependents when they file income tax returns. In like manner, a couple is not discouraged from bearing children in excess of four because they can no longer claim additional exemption,” Recto said.

“The tax code only discriminates against large families,” he pointed out.

Citing data from the Commission on Population, Recto said it is only the women from the lowest and second lowest economic bracket who have four or more children and “these groups are not even income tax payers.”

The proposed bill also calls for the inclusion of “legitimated” children as qualified dependent children in order to harmonize it with the provisions of the amended Family Code that allows the legitimization of children born outside of wedlock or to unmarried couples.

Parents who are not employed, living with and dependent on the taxpayer for chief support or incapable of self-support because of mental or physical handicap, would also be classified as dependents under the bill.

The bill also cites the challenges faced by families who have dependents with disabilities, or incapable of self-support.

Introduced by Sen. Manuel Villar Jr., the provision of the bill would allow the qualified taxpayer to claim additional exemption for these dependents, provided that only the legal guardian can avail of this for a particular taxable year.

Recto said the Social Security System, the Government Service Insurance System and the Philippine Health Insurance Corp. do not impose caps on number of dependents that can be claimed by their members.

“The impact of this bill is on the economic reprieve that will be granted to families – alleviating the financial difficulties of taxpayers with more children, and allowing individuals to cope with the cost of caring for parents and legitimated children or those children with disabilities,” he said.

Tax incentives

The Senate also approved the Alternative Fuel Vehicles Incentives bill, seeking to grant tax incentives to manufacturers and importers of alternative fuel vehicles (AFV).

The proposal, Senate Bill 2856, is also seen as part of government’s efforts to reduce the country’s dependence on fossil fuels and cut down air pollution.

It is also expected to encourage the entry of more clean fuel motor vehicles in the market and consequently, bring down their cost.

The current cost of alternative fuel vehicles, specifically hybrid cars that combine gas and electric power, is considered prohibitive particularly to the middle class who have a wider range of other vehicles to choose from at lower prices.

Alternative sources of energy to power vehicles include solar, wind, hydrogen fuel cell, compressed natural gas or liquefied natural gas and liquefied petroleum gas.

“These types of vehicles are low on pollution but high on price. The irony of it is that green cars are expensive, while conventional cars, if you read the newspapers ads, are easy and affordable,” Recto said.

“One reason is that because the technology is new, the efficiency that mass production sets off which in turn lowers prices hasn’t kicked in yet. This is the function of the market,” he added.

In order to encourage the entry of more AFVs in the market, the bill would grant both fiscal and non-fiscal incentives to the manufacturers or assemblers as well as the importers of these vehicles.

Manufacturers or assemblers of completely knocked down units of AFVs, including the conversion of vehicles into electric, hybrid and other AFVs, would be granted an exemption from the payment of excise taxes and duties for nine years.

In addition, these manufacturers and assemblers would be granted an exemption from the payment of the value added tax for the purchase and importation of raw materials, spare parts, components and capital equipment used in the manufacture or assembly of AFVs for nine years.

Importers of completely built units of AFVs, on the other hand, would be granted an exemption from the payment of excise taxes and duties for nine years.

Owners of AFVs would also be given incentives for using these cleaner vehicles, more particularly being exempted from paying the Motor Vehicle User’s Charge in registering their vehicles.

As far as non-fiscal incentives are concerned, owners of AFVs would be given priority in the registration and issuances of plate numbers and priority in franchise applications for public utility vehicles.

Recto said the bill would hopefully aid in protecting the environment by reducing the levels of pollution in the air.

“Every hour, 2,200 metric tons of carbon dioxide is pumped into the air, a carbon footprint which requires the planting of 56,000 trees to absorb all that poison. Every hour, traffic jams in Metro Manila alone cause P16 million in economic losses. Every hour, four Filipinos die from dirty air,” he said.

In the end, Recto noted the bill should result in lower demand for fossil fuels, the prices of which would remain volatile due to the ever-increasing global demand.

“The Philippines consumes an average of 49 million liters of petroleum products a day, a bulk of which is directed to transport,” Recto said.

“By promoting AFVs, we shield ourselves from the volatility of oil prices, when tantrums of teapot dictators in OPEC countries can cause oil price shocks, or when a small rustle in the Arab spring can send oil prices to winter-time highs,” he said.