Business and Tax during Elections

The barangay and Sangguniang Kabataan (SK) Elections finally happened yesterday after being postponed when President Rodrigo Duterte signed Republic Act 10952, moving it from October 2017 to May 2018.

Never underestimate the business opportunities and amount of money that goes around during elections, even for barangay and SK level. Money comes from all sources, declared or undeclared assets of individuals funding political campaigns to support their candidates.

All political candidates are willing, if not desperate to spend millions of pesos to win an election. Bulk of the campaign spending is allocated to political advisers/lawyers, supporters, endorsers, campaign ads and paraphernalia e.g., posters, streamers, tarps, shirts, jingles including TV/radio/print and social media ads.

The impact to the economy is clearly reflected in the significant and consistent increase in our Gross Domestic Product (GDP) during election years by 2-3 percentage points from the 4.4% average GDP. The government also has its share of spending through the Commission on Election (COMELEC). But are we able to collect the taxes from all these economic activities?

Tax effort is the ratio between government’s tax collection and the country’s whole economy, as measured by its GDP.

In 2017, the Bureau of Internal Revenue (BIR) stated that its tax collection has improved, taking 11.26% of the Gross Domestic Product (GDP) as compared to its five-year average of 10.5 percent to 10.9 percent. Commissioner Caesar “Billy” Dulay gave credit to the taxpayers who responded to the revenue agency’s call to cooperate and pay the right taxes.

But election deals with a lot of dirty tricks and propaganda including money laundering and use of drug money or even contributions from smugglers and tax evaders.

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

Generally, campaign expenditures are also subject to 5% expanded withholding taxes (EWT) which should be remitted to the government, but any spending made before or after the campaign period will be subject to 6% donor’s tax and may not be used as deductible expense on the part of the donor.

Also, any excess in campaign contributions shall be subject to income tax due and payable by the political candidates.

All these information must be reported in their Statement of Election Contributions and Expenditures (SECE) to be submitted to COMELEC.

If only all political candidates will declare everything and pay the right taxes, we may be able to fund the free education and other social services provided by the government without having to rely on new taxes under TRAIN.

That’s why among the important criteria we have to consider during election is whether our candidates are paying the right taxes. How can we entrust to them government money if they are not even contributing to it?

Their income as public servants is just the same as regular employees and therefore should be subject to income taxes. If they have a business, it should also be subject to business and income taxes whether registered as sole proprietorship or corporation.

Basically, it is our responsibilities as voters to check if they are declaring everything in their Statement of Assets, Liabilities, and Net Worth (SALN).

Although this is just the barangay and SK elections but the previous years have shown that even at this level, politics have come into play. And that is why voters should still be wise in choosing their local leaders.

As we always say, if we want a better Philippines, we need to be better citizens and better taxpayers. And in this election, we are called to be better citizens by voting honest and competent public servants whom we can entrust our hard-earned money.

And for our teachers who are serving as volunteers during elections, it has to be clarified that all income regardless of source and type are taxable unless explicitly exempted by law. BIR may, however, consider including the honorarium as part of compensation income subject to withholding tax on compensation instead of withholding 5% outright since some teachers may earn below P250,000 income tax exemption threshold.

But if we really want to exempt their honoraria from income tax, our legislators must pass a law exempting them and not put pressure on the BIR to waive the 5% withholding as it will go against their mandate to assess and collect taxes.  

In summary, no matter how much we dislike paying taxes because we feel that they just go to the pockets of corrupt government officials, I hope we see it, not as a burden, but rather our contribution to the government. After all, they need to collect the right taxes to fund their programs which will benefit everyone in the long run.

From our end, we develop initiatives that benefit both the taxpaying public and the government. We are launching the Tax Whiz PH, an on-the, all-in-one mobile app equipped with tax calculator, tax calendar, and online filing & payment features that will make it easier for taxpayers most especially the Self-Employed and Professional (SEPs) to comply. This will help the BIR widen its taxpayer base which will result to more collection.

To know more about the Tax Whiz PH, subscribe now at app.acg.ph for free and get an e-mail notification once it is ready for download via Google Play Store (Android) and App Store (iOS).


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