Scrapping of stamp tax on OFW money transfers pushed
Gov’t collecting P1.2B on cash wired home by overseas Filipino workers
The Trade Union Congress of the Philippines (TUCP) is pushing for the immediate abolition of the documentary stamp tax (DST) on the money sent home by overseas Filipino workers (OFWs) through the banking system.
“This is one way for the government to help drive down burdensome remittance charges, and help the families here of our OFWs, particularly those struggling to rebuild their lives following the devastation caused by recent typhoons,” said TUCP secretary-general and former Senator Ernesto Herrera.
At present, Herrera lamented that under the Internal Revenue Code, 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 sent through banks.
This means that OFWs actually pay a tax of P34.85 for every $500 or P23,230 (at $1:P46.46) that they send home. This is on top of the usual foreign and local bank fees and the P0.50 to a dollar margin that domestic banks are allowed in converting foreign exchange into pesos.
“The amount may not seem much, but if an OFW sent home $500 every month for 12 months, he or she will have paid P418.20 in stamp taxes alone,” said Herrera former chairman of the Senate committee on labor, employment and human resources development.
Herrera estimates that the government collects some P1.2 billion in DST every year from the cash sent home by OFWs via banks.
OFWs coursed through banks a total of $16.426 billion in remittances in 2008. From January to August this year, they have so far wired home via banks a total of $11.3 billion.
“This question really is, whether the P1.2 billion is better kept in the government’s pocket, or in the pockets of the families here of our OFWs. We say abolish the stamp tax on the money transfers made by our OFWs, and let their families here keep the money for them to spend,” Herrera said.
“If Congress was able to permanently remove the DST on the secondary sale of shares of stock, then surely it can also get rid of the DST on the money sent home by our OFWs,” Herrera added.
Congress recently passed a new law abolishing the P0.75 DST for every P200 par value of shares of stock sold through the Philippine Stock Exchange. This benefited investors engaged in the buying and selling of publicly traded shares of stock.
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.