POLITICAL PARTIES and candidates spent billions of pesos in the last May elections, and it’s only expected that some of that money would have headed in the direction of the Bureau of Internal Revenue (BIR). Yet even though ‘tis nearly the season to be merry, there still seems to be no joy in the tax bureau when it comes to collecting the appropriate taxes related to the polls held more than half a year ago.
That’s because before it can collect what could be a considerable pile of money, the Bureau will first have to plow through the documents filed with it and the Commission on Elections (Comelec) by some 45,000 candidates who vied for 18,503 elective posts last May.
In addition, a PCIJ review of some of the documents filed with the BIR and Comelec by senatorial candidates alone reveal legal grey areas that the tax agency will have to resolve before it can demand whatever was supposed to be due it.
Obviously, though, any effort of the BIR to get last May’s candidates — both winners and losers — to pay the right taxes on campaign contributions and expenditures is bound to have a lucrative reward. Consider the senatorial race alone: In total, the 33 senatorial candidates spent P1.7 billion, which roughly means some P78 million (net of value-added tax or VAT) in just withholding tax revenues.
Aside from collecting revenue for the government, though, any BIR move to impose tax on the candidates and political parties could also help drive home the point that election and tax laws can no longer be ignored, especially by those who say they want to become leaders and legislators.
Old hands, old sins
Unfortunately, going by the documents filed by the 33 senatorial candidates — mostly old hands at running for office — in last May’s elections, these laws appear to be incomprehensible to some and completely lost on others. In fact, five among the winning candidates failed to register with the BIR as withholding agents.
Comelec Commissioner Christian Robert S. Lim, head of the election body’s Campaign Finance Unit (CFU), clarifies that those who do not comply with the tax regulations do not necessarily violate provisions of the Election Code. Instead, they would be in trouble because of the Tax Code and its implementing rules and regulations. He says, however, that Comelec “can share all the documents and data that the BIR needs for its own use.”
Under Comelec Resolution No. 9476, all candidates and political parties were obliged to declare and submit to the Commission a full, true, and itemized Statement of Election Contributions and Expenditures (SOCE) that includes dates of the issuance of receipts and the contributors’ and payees’ addresses and Taxpayer Identification Numbers (TINs). They were also required to attach receipts to their SOCEs.
In addition, the Omnibus Election Code (OEC) says that only contributions given to candidates and political parties for campaign purposes that are duly reported to Comelec are exempted from donors’ tax. Otherwise, the BIR will assess either the contributors for donors’ tax or the candidates for income tax as a result of non-compliance with Comelec rules. The Code further stipulates that only expenditures authorized by the candidate or the treasurer of the party would be considered campaign expenditures.
Two BIR regulations are also significant during elections. One is Revenue Regulation No. 8-2009, issued in October 2009, which subjects campaign expenditures to five-percent withholding tax. Another is Revenue Memorandum Circular No. 15-2013, issued in February 2013, which executed certain provisions of Comelec Resolution No. 9476 that details rules on campaign finance and disclosure.
Receipt and report
BIR Commissioner Kim S. Jacinto-Henares puts it simply: “All payments (donations received and payments expended) should be receipted and reported.” The same person or entity running for office must also be the one who receives the donation and makes the payment and withholds tax for campaign expenditures.
Candidates and political parties participating in an election are thus required to register or update their status as withholding agents with the BIR to be able to withhold tax from their expenditures. They must also secure, separately, an Authority to Print (ATP) receipts from the Bureau to be able to issue official receipts to their contributors.
Since BIR does not print receipts, it issues an ATP upon the request of a person or an entity allowing them to print BIR-authorized receipts. But to address the immediate need for receipts in the last elections, the Bureau also authorized its district offices to issue temporary BIR receipts without requiring an ATP.
Henares says candidates who somehow failed to do such could still file for late application of ATP and/or file for late registration as withholding agents to eventually issue receipts and remit taxes. They would still have to face the necessary penalties for being late (P1,000 for late filing of ATP and basic tax shall be subject to 25-percent surcharge and 20-percent annual interest), but at least they would have avoided a case filed against them by the BIR.
Henares also says each candidate or party must pass a four-level process of verification: First is proof of BIR registration. Then comes whether or not the candidate or party had an ATP. Third is whether or not the candidate/party withheld tax for campaign expenditures. The fourth is whether or not the candidate/party declared excess campaign funds in the SOCE and declares these in the income tax return (ITR) or returned the money to donors.
Of the 33 senatorial candidates, 13 were not able to register with the BIR as withholding agents. These included five winning candidates (Senators Alan Peter S. Cayetano, Gregorio ‘Gringo’ B. Honasan II, Lorna Regina ‘Loren’ B. Legarda, Mary Grace Poe-Llamanzares, and Cynthia A. Villar) and eight losing candidates (Greco Antonious Beda B. Belgica, Teodoro A. Casiño, Margarita ‘Tingting’ R. Cojuangco, Rizalito Y. David, Baldomero C. Falcone, Marwil N. Llasos, Christian M. Señeres, and Eduardo ‘Brother Eddie’ C. Villanueva).
Cayetano, Honasan, and Villar, however, were still able to secure temporary BIR receipts, while the 10 others failed to do so.
A consultant’s TIN
Legarda, meanwhile, issued Antonio B. Legarda-Consultant Official Receipt (VAT Reg. TIN: 149-234-494) to her contributors. According to Henares, donations received by the consultant would be categorized as his income and, consequently, would not be tax-exempt. “How can you say that (whatever he received) were campaign donations when Antonio Legarda never campaigned?” she asks.
Poe-Llamanzares, for her part, enrolled in her expenditure reports the actual contributors to her foundation, Friends of Grace Poe, said her husband Teodoro ‘Neil’ Llamanzares in a written reply to PCIJ’s queries. The finance head of Poe-Llamanzares’s campaign team, Neil Llamanzares said they did this “(in) the spirit of transparency.”
Neil Llamanzares also told PCIJ that Friends of Grace Poe collected campaign funds for his wife via a Comelec Authority to Incur Expenditures. He said those donations “were meant for and spent for campaign expenses only.”
Poe-Llamanzares, daughter of the late action film star Fernando Poe Jr., used the foundation’s official receipts in accepting donations. Interestingly, another action star scion, BIR-registered Joseph Victor ‘JV’ Ejercito, also used receipts from his foundation, JV Para sa Bayan Movement Inc., to acknowledge campaign contributions. At the same time, however, the foundation was enrolled as one of Ejercito’s donors.
Bayan Muna’s TIN
Similarly, independent candidate Teddy Casiño, who ran under Makabayang Koalisyon ng Mamamayan (Makabayan), issued a Makabayan Official Receipt (NON VAT Reg. TIN: 433-136-942) to his contributors.
But Makabayan itself is unregistered with the BIR; the TIN it used in the Makabayan O.R. belongs to Bayan Muna. Makabayan is a coalition of eight party-list groups that include Bayan Muna.
The case of Casiño and Makabayan is something BIR has “not really dealt with,” says Henares. She adds that there would be no problem if the coalition agreed that Bayan Muna would issue the receipts. A problem would arise, she says, “(if) Bayan Muna gets all the donations (and) donates to the candidate.” The candidate would then have to issue another receipt, Henares says.
Foundations not parties
As for Ejercito and Poe-Llamanzares, Henares says that the foundations of both candidates are not registered as political parties or as candidates. She says that their cases would be verified through the following areas of concern: accreditation of the foundation as tax-exempt entity, validation of the nature of donations as tax exempt, and the purposes of the foundation as indicated in its Articles of Incorporation and By Laws.
For a foundation to qualify as a tax-exempt entity, Article IV, Section 30 of the Tax Code provides that “no part of (the non-stock corporation’s) income or asset shall belong to or inures to the benefit of any member, organizer, officer or any specific person.” The BIR also says on its website that a donation will be tax exempt “provided (that) no more than 30 percent of said gifts will be used by such donee for administration purposes.” Henares thus says that if the purposes of their foundations are to campaign, Ejercito and Poe-Llamanzares should have issued contributor’s receipts for the donations made to them by their foundations.
BIR regulations also require withholding agents to file a form and pay the appropriate tax within 10 days following the end of the month when the withholding was made. Should candidates fail to file and remit the taxes on time, they would be subject to penalties as indicated in the Tax Code: basic tax (expenditures net of VAT) is subject to 25-percent penalty plus 20 percent annual interest. The computed basic tax would then be subject to withholding tax.
Of the 20 registered withholding agents, those who attached BIR Form 1601-E to their SOCEs were Samson S. Alcantara, Ernesto ‘Ernie’ Maceda, Ma. Ana Consuelo ‘Jamby’ A.S. Madrigal, Antonio ‘Sonny’ Trillanes IV, and Juan Miguel ‘Migz’ Zubiri. These forms indicate that a total of P3,153,469.28 had been remitted to BIR for a tax base of P63,069,385.5 in campaign expenses.
Late remit for most
As far as their forms go, though, Alcantara was the only one who withheld a five-percent tax on his total campaign expenditures of P344,459.02 and remitted P17,222.95 to the BIR.
Maceda, Madrigal, Trillanes, and Zubiri withheld and paid taxes to the BIR for their payments to television, radio, and newspaper ad placements only as indicated in their attached BIR Forms 1601-E.
Maceda remitted a total of P1,108,564.25 to the BIR for a tax base of P22,171,284.94, for the period of February, March, and April 2013. These income payments were made to ABS-CBN Broadcasting Corporation, GMA Network, Inc., Tape, Inc., and Creative Concepts, Inc. The total tax base was equivalent to 70 percent of his P30.82 million campaign expenses.
Madrigal remitted P225,781.97 as withholding tax from a payment of P4,515,639.4 to GMA Network, Inc. But the figures do not yet reflect the P21,534,095 her campaign spent on TV ads (as declared in Annex H of her SOCE) and cover only about 12 percent of her P39 million total expenses.
Trillanes remitted P117,555.17 as withholding tax from the P2,351,103.92 total payments made to ABS-CBN Broadcasting Corporation and Mertz Advertising & Marketing, Inc. On the whole, however, he spent P25,101,690.55 for ad placements, which made up 83 percent of his total P30.14 million expenses.
Zubiri also withheld and remitted to BIR a total amount of P1,684,344.91 for a tax base of P33,686,898.22, for the period of March and April 2013. The tax base corresponds to nearly half of his total declared expenses (P68.59 million) on political advertisements. His overall campaign expenses were valued at P72.59 million.
No attached receipts
Of the 20 registered withholding agents, too, seven (Ma. Lourdes Nancy Binay, JV Ejercito, Ana Theresia ‘Risa’ Hontiveros, Ramon ‘Jun’ Magsaysay Jr., Juan ‘Jack’ Ponce Enrile Jr., Francis ‘Chiz’ Escudero, and Aquilino Martin ‘Koko’ Pimentel III) had attached some expenditure receipts to their SOCEs that indicated deductions of withholding tax.
Five (Juan Edgardo ‘Sonny’ Angara, Paolo Benigno ‘Bam’ Aquino, Richard ‘Dick’ Gordon, Edward Hagedorn, and Ricardo ‘Dick’ Penson) were not seen with any indication of tax deduction. Two (Ma. Milagros ‘Mitos’ Magsaysay and Ramon Montaño) did not attach any expenditure receipt to their SOCEs, while John Carlos de los Reyes’s campaign was paid for by his political party. Altogether, their expenditures amounted to P1.08 billion that could generate about P47.48 million in tax revenues.
Speaking for Aquino, lawyer Lorraine Castañeda said Bam Aquino paid the BIR P5,691,124.17 from a total taxable expenditure of P113,290,669.65 for the months of March, April, May, and June. Aquino’s total elections expenditures amounted to P135.2 million.
In the case of Gordon, lawyer Rodolfo Reyes said in a letter to PCIJ that the bulk of the P6.54 million in Gordon’s campaign expenditures were donations, most of which “were undertaken by Bagumbayan VNP Movement, Inc.” He added that Gordon withheld and remitted to BIR a total amount of P5,326.31 for purchases worth P59,850 that he made with his personal money. Reyes said the amount Gordon remitted to BIR included penalties due to late payment.
Of the 13 unregistered candidates, two (Villar and Poe-Llamanzares) confirmed having withheld taxes for their campaign expenditures. Two (Cayetano and Legarda) indicated tax deductions in their SOCEs while these were missing in the SOCEs of five other candidates (Belgica, Casiño, Cojuangco, Honasan, and Señeres). Four candidates (David, Falcone, Llasos, and Villanueva) did not attach any receipt in their SOCE. Partymates David and Llasos noted that their campaigns were paid for by Ang Kapatiran.
PCIJ’s review of the candidates’ SOCEs meanwhile shows that many failed to attach receipts made out to donors. Even Mitos Magsaysay, Maceda, and Montaño, who were able to secure ATP receipts from BIR, seemed to have not issued receipts to their contributors.
Mitos Magsaysay and Montaño explicitly declared their non-issuance of receipts by noting “without O.R.” and “none” in Annex G of their SOCEs. Although Gordon noted an acknowledgement receipt in Annex H of his SOCE, he did not provide actual copies to Comelec.
No receipts at all
Two unregistered candidates, Belgica and Villanueva, did not supply any receipt detail in Annex G of their SOCEs while Cojuangco declared issuing an acknowledgement receipt to her contributors.
David and Falcone did not attach any receipt as well, while Llasos explained his failure to issue any receipt in part by saying that his political party had paid for his campaign.
In his SOCE, Falcone had noted that receipts would be available upon formal request. But when Comelec requested for them, he failed to produce any; instead, he later added “none” in Annex G of his SOCE. Falcone later told PCIJ in a letter that his campaign funds were sourced from the personal funds of his family members.
For their part, David, de los Reyes, and Llasos declared their political party, Ang Kapatiran, as their sole contributor. But they did not issue any receipts to it.
The party paid P30,000 for David’s campaign and P20,000 each for de los Reyes’s and Llasos’s.
Replying to PCIJ’s queries, Llasos said, “To my knowledge, I have not been officially informed by the Comelec if my SOCE was appropriate or not.”
He also said that if the P20,000 donation made to his campaign was found to be subject to income tax, he would consider either returning the money to the party or declaring it as part of his income tax. “Magkano lang naman ‘yung P20,000 (P20,000 is not much anyway),” he commented.
Then he added, “I will ask guidance from the party on this.”
Under revenue regulations, failure to file the appropriate SOCE with Comelec would mean a candidate would not be able to deduct his or her campaign expenses from the contributions received. This leaves a candidate with unused funds, which shall be subject to income tax, unless he/she chooses not to use the donations and return these to the donors.
Lim clarified that a correct SOCE should contain all the required annexes plus the attached contributors’ receipts and expenditures’ receipts. It should also indicate a breakdown of expenditures and contributions, including the dates of issuance of receipts, addresses, and TINs of both contributors and payees.
As of last June 29, Comelec CFU deemed the SOCEs of 11 candidates as “not filed” for failure to complete their deficiencies: Belgica, Cojuangco, David, de los Reyes, Enrile, Falcone, Llasos, Maceda, Magsaysay, Montaño, and Villanueva.
In total, these 11 candidates had declared receiving about P187.92 million in donations made both in cash and in kind.
Enrile received the largest donation of P8.28 million in cash and P142.52 million in kind. Mitos Magsaysay received P11.8 million worth of airtime. Montaño was able to collect P6.6 million in cash and P290,000 in kind; Villanueva, P6.34 million in cash; Maceda, P6.2 million in cash; Cojuangco, P5 million in cash; Falcone, P310,000 in cash and P190,000 in kind; and Belgica, P250,000 in cash.
In contrast, Aquino issued receipts to his contributors even after the elections. Last June 28, Aquino updated his SOCE and declared an additional P10.88 million worth of airtime given by Rene E. Puno, Alberto D. Lina, and Lilia B. Palines. Puno’s donation was valued at P5 million; Lina, P5 million; and Palines, P876,098.77. The receipts were dated June 27, 2013.
Bam paid income tax
On behalf of Aquino, Castañeda wrote to PCIJ: “On July 2, 2013, Sen. Aquino through his authorized representative paid the amount of P337,803.90 as income tax for the excess contributions received in the 2013 campaign.”
Castañeda said that the excess funds were used for the operations of Aquino’s office, among others, from May 28 to June 30, 2013.
Four other candidates declared having received excess campaign donations. Binay’s unused campaign funds amounted to P8,174,341.68; Escudero’s, P746,690.9; Enrile’s, P396,838.09; and Poe-Llamanzares’s, P40,743.23.
Following tax regulations, the 11 candidates whose expenditure reports were deemed as “not filed” and the candidates who had excess funds shall include the received contributions in their taxable income and pay the taxes according to their taxpayer status, should they choose to use them.
Candidates registered as self-employed individuals or professionals would have had to file their ITRs on or before August 15, 2013. Compensation income earners, or individuals whose taxes are deducted directly from their salaries, have until April 15, 2014. Those who are neither of the two have until August 15, 2013 as well.
Aquino, Belgica, de los Reyes, Enrile, and Montaño, who said they were businessmen, would fall under the first category. The same goes for Llasos and Maceda, both lawyers, David, a radio commentator, Cojuangco, a consultant at Philippine Public Safety College, Falcone, a business consultant, and Villanueva, an evangelist/educator.
Mitos Magsaysay’s term as congresswoman of Zambales ended on June 30. — With research and reporting by Rowena F. Caronan, Fernando Cabigao Jr., and Karol Ilagan, PCIJ, November 2013