BIR wants ‘Cedula’ scrapped

MANILA, Philippines --- The Philippines should now scrap the collection of community tax - commonly known as cedula - since the Spanish century-old taxation scheme has been proven to be a burden to the national government rather than an income generator.

Bureau of Internal Revenue (BIR) Commissioner Kim Henares yesterday raised this proposal in response to the recent advice of debt-watcher Fitch Ratings that the revenue base of the Philippine government had to be further broadened.

In a press conference, Henares pointed out that the government is now working hard to address the concern of Fitch Ratings by initiating more reforms to plug the remaining leaks in the taxation system.

Abolishing the collection of community tax is one of the reforms being eyed by the BIR, according to Henares.

"Sa totoo lang, if there's going to be any policy reform, siguro ang unang reporma na dapat gawin ay alisin ang hindi na kailangan. Ang cedula ay isang bagay na hindi na kelangan ngayon," Henares stressed.

"So if you want reforms, I think that [community tax collection] is an area that is ripe for reform. So you remove that [community tax collection]," she said.

The community tax was first introduced by Spanish colonizers in the 19th century to Filipinos and the community tax certificate (CFC) - also known as cedula - was used as an identification card that the people had to carry at all times.

When the Local Government Code was ratified in 1991, cities and municipalities were authorized to collect community tax from corporations, and from residents aged 18 and above who have been employed on a wage basis for at least 30 consecutive days, or who are engaged in business, or who are required by law to file an income tax return.

The tax has two components: a.) the basic community tax - P5 for individuals and P500 for corporations; and b.) the additional community tax - for individuals, P1 per P1,000 of income; additional tax for corporations will depend on their earnings and real property the preceding year.

The additional tax should not exceed P5,000 for individuals, and P10,000 for corporations.
The community tax should be paid to the barangay, city, or municipal treasurer of the individual's place of residence, or of the location of the corporation's principal office.

Exempted are diplomatic and consular representatives, and visitors staying in the Philippines for less than three months. They can still get a cedula voluntarily for P1.

A person is required to present a cedula when he or she acknowledges a document before a notary public; takes an oath of office upon election or appointment to a government position; receives a license, certificate, or permit from a public authority; pays a tax or fee; receives money from a public fund; transacts official business; or receives salary from a person or corporation.

Henares, however, pointed out that the BIR incurred losses instead of earning from community tax collections in the past years.

She revealed that the BIR shells out millions of pesos for the printing of the CTCs which they will give to more than 1,000 cities and municipalities. The catch, according to Henares, was that while the BIR shoulders the expenses of the CTC printing, the government's number one income generator does not receive a single penny from the cedulas.

"But the objection is not about the printing of cedula. It is the whole concept of imposing the whole cedula itself," the BIR commissioner stressed.

Meanwhile, Henares has also thumbed down the proposal of Senator Ralph Recto to slash the tax imposed on minimum wage earners, in the light of the recent credit upgrade of the Philippines.

She explained that cutting public tax would be futile since the Philippines already posted a budget deficit of P11.749 billion in February as a result of accelerated spending and lower revenues.

BIR collections for the month totaled P74.519 billion, 8.5 percent more than the P68.694 billion recorded in February 2012, but 3.4 percent short of its target of P77.117 billion.

"Sa ngayon deficit tayo at hindi naman surplus Ang gobyerno natin hindi pa naman kumikita, deficit tayo, so anong ibabalik natin? Secondly, sinabi din ng Fitch na yung weakness pa rin is yung revenue collection. So kelangan pa din natin pag-igtingin uung revenue collection. Ine-expect ng Fitch na magtatrabaho pa tayo at i-broaden yung revenue base."