Don't tax OFW income - Recto

Sen. Ralph Recto today cautioned the government to go slow on a proposal to tax income of overseas Filipino workers (OFWs).

Recto said OFW remittances are deemed export receipts and by current policy are outside the ambit of taxation.

Recto fears that if the proposal advanced by academics from De La Salle University to tax remittances of workers abroad would become state policy, OFWs might send money home through informal channels.

"Remittances would go underground, or follow any scheme outside formal banking channels," he said.

In 2007 an estimated 12 million Filipinos abroad sent home $12.7 billion, a record that is on track of being surpassed this year, given the 19% jump, year-on-year, on the value of remittances in the first two months of 2007.

"One of the incentives of remittances is the guaranty that it won�t be taxed. If we are granting incentives for capital coming from abroad, then why should we not extend the same to income generated abroad?" he said.

The De La Salle proposal would dampen repatriation of OFW income, he added.

Recto said government's medium term expenditure program does not factor in the need for new taxes, only better tax administration.

"In fact, government is looking at a bigger budget space, and in its projections does not hint of the need to tax OFWs," he said.