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Unused campaign contributions to be taxed

from NAMFREL Election Monitor Vol.2, No.15

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The Bureau of Internal Revenue (BIR) issued on June 14 Revenue Regulation No. 7-2011, outlining the agency's policy on unused campaign contributions. Though the BIR upholds that campaign contributions are non-taxable since "such contributions were given not for personal expenditure/enrichment of the concerned candidate, but for the purpose of utilizing such contributions for his/her campaign," it makes an exception for campaign contributions that were unused.
From Section 2:
"Unutilized/excess campaign funds, that is, campaign contributions net of the candidate's campaign expenditures, shall be considered as subject to income tax, and as such, must be included in the candidate's
taxable income as stated in his/her Income Tax Return (ITR) filed for the subject taxable year."

It adds: "Any candidate -- winning or losing -- who fails to file with the Commission on Elections (Comelec) the appropriate Statement of Expenditures required under the Omnibus Election Code, shall be automatically precluded from claiming such expenditures as deductions from his/her campaign contributions. As such, the entire amount of such campaign contributions shall be considered as directly subject to income tax.
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There was massive spending by candidates in the May 2010 elections. According to Comelec data, Nacionalista Party (with Manny Villar as standard-bearer), spent Php 228.7 million, of which Php 80 million were contributions. President Aquino's Liberal Party spent P158.1 million, with more than a third coming from contributions, while the then-ruling Lakas-Kampi-CMD spent Php 130.68 million, all coming from contributions.

Many believe said expenses filed before the Comelec were underdeclared, to comply with spending caps set by law.

Speaking with BusinessWorld, BIR commissioner Kim Jacinto-Henares said that though they had to rely on documents provided by Comelec to enforce the order, the BIR have other means of checking candidates' campaign funds and expenses. "If the candidates underdeclare their contributions, their excess funds will come out in their assets. If they have no way of backing up their assets with the proper explanations, we can investigate the possibility of tax evasion," she said.

In a related development, Comelec Law Department head Ferdinand Rafanan has said that the Commission has already established a separate campaign finance unit. The Comelec's Law Department -- which is also in charge of investigating election offenses, among other things – used to be in charge also of monitoring the statement of expenditures and contributions of candidates.

Read the BIR's policy here: http://bit.ly/mg6LQ9

(Sources: BIR, BusinessWorld)
 
 
 
 
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