#AskTheTaxWhiz: Are campaign expenses taxed?

Are the campaign funders of political parties paying the right taxes? Do they belong to the list of top taxpayers for 2014? How come they are able to donate millions of pesos?

Honestly, I hope they are. The Commision on Elections (Comelec) requires political parties to submit their Statement of Elections Contributions and Expenditures (SECE). The Bureau of Internal Revenue (BIR) must review it vis-a-vis the list of top taxpayers.

While campaign donations are tax-exempt, the amounts can give us an idea of the income that allows donors to make significant contributions to candidates and political parties.

In fact, the Comelec and the BIR should make the list public so we know whether the campaign funders of which politician are indeed paying the right taxes. 

Are politicians exempt from paying income tax? How come most of our public servants live an extravagant lifestyle in an exclusive subdivision and even afford a lavish Balesin wedding?

No, they are not tax exempt. Their compensation as public servants is subject to income tax like regular employees. If they have a business, the same is subject to business and income taxes whether registered as sole proprietorship or corporation. The issue is if they are declaring everything in their Statement of Assets, Liabilities, and Net Worth (SALN).

In this case, BIR should work with the Ombudsman and the Comelec in making sure that every politician will declare everything truthfully from the filing of candidacy to filing of SALN and Income Tax Return (ITR).

It is quite ironic if a public official will declare less than P10 million ($212,551.08) net worth and afford a lavish Balesin wedding like Senator Francis “Chiz” Escudero, who  is running now for vice president, in tandem with Senator Grace Poe.

Rather than questioning the royal wedding of actors Dingdong Dantes and Marian Rivera, the taxpaying public must be more concerned with the lavish Balesin wedding of a senator who declared only P8.24 million ($175,153.16) net worth in 2013 after being the poorest at P4.02 million ($85,329.68) in 2012.

Any increase in anyone’s net worth is subject to tax whether as compensation (income tax), gift or donation (donor’s tax), or inheritance (estate tax). So it is not difficult to know if a public official is underdeclaring his net worth and, worse, not paying his taxes correctly.

During elections, almost all political parties and candidates spend millions, if not billions, of pesos to campaign. Can we collect taxes from campaign expenditures, which are almost always expected to increase our gross domestic product in the first semester of 2016?

Of course! In fact, campaign expenditures are subject to 5% expanded withholding tax and the political parties and/or candidates are required to withhold and remit this to BIR. The question is whether they declare all the contributions and expenditures.

That is why in this coming election, we need to make sure that all political parties and candidates will withhold 5% of their total campaign expenditures and and remit that to government. And from the list of all campaign funders, BIR must start investigating whether all of them are paying the right taxes.

Can BIR audit all taxpayers? Approximately how many BIR examiners do we have versus the registered taxpayers? How do we know if we qualify for the Citizen Tax Planning (CTP) Certification Program?

No. With less than 3,000 BIR examiners, there is no way BIR can subject the more than 22 million registered taxpayers.

You are qualified to undergo the Citizen Tax Planning (CTP) Certification Program if you are:

• Family business and/or small medium enterprise
• Regularly audited by BIR
• Getting almost the same assessment with increasing amount
• Paying at least P500,000 ($10,612.89) deficiency taxes and/or compromises as a result of BIR audit, but now
• You are committed to pay the right taxes and to support the call for a genuine tax reform

To know more about the CTP Certification Program and how to enjoy a tax-free lifestyle – a lifestyle not free from taxes but free from the unnecessary burden of penalties and compromises, in 2016 – email us at consult@acg.ph or call us at +63 2 622-7720.

Got a question about taxes? #AskTheTaxWhiz! Tweet @rapplerdotcom or email us at business@rappler.com. – Rappler.com

Mon Abrea is a former BIR examiner and an advocate of genuine tax reform. He serves as chief strategy officer of the country’s first social consulting enterprise, the Abrea Consulting Group, which offers strategic finance and tax advisory services to businesses and professionals. Mon’s tax handbook, Got a Question About Taxes? Ask the Tax Whiz! is available in bookstores nationwide. Follow Mon on Twitter @askthetaxwhiz or visit his group’s Facebook page. You may also email him at consult@acg.ph.

US$1 = P47.11