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Lawmaker calls for investigation into BIR circular taxing voluntary social fund contributions

5 December 2011 No Comment

December 5, 2011

A party-list lawmaker today slammed a memorandum circular issued by the Bureau of Internal Revenue (BIR) which taxes voluntary GSIS, SSS, Medicare, and PAG-IBIG contributions, arguing that it violates provisions in existing tax laws.

ACT Teachers Party-List Representative Antonio L. Tinio said that Revenue Memorandum Circular 27-2011 (RMC 27-2011) issued by BIR Commissioner Kim Henares on July 1, 2011 violates Philippine Constitution provisions and runs counter to the National Internal Revenue Code, or Republic Act 8424 (NIRC, or the Tax Reform Act of 1997).

He cited Article VI Sec. 28 of the 1987 Constitution provision that is violated by the said memorandum circular. “The Constitution guarantees that taxation must be uniform and equitable and that Congress is mandated to evolve a progressive type of taxation,” he said. “But with RMC 27-2011, it effectively increases the burden for individual taxpayers over those corporate taxpayers who apparently realize more income,” added Tinio.

“Under the BIR circular, corporate taxpayers are not affected.  Worse, our (existing) tax laws already accorded corporate taxpayers more chances to reduce their taxable income through exemptions and deductions not available to individual taxpayers. The BIR seeks to further make corporate taxpayers better off than the common laborer or employee,” Tinio argued.

“We welcome President Aquino’s vow to improve tax administration and efficiency in the collection of taxes, but never at the expense of the poor Filipinos,” said Tinio. “Why not impose more taxes on those corporate taxpayers who have a much higher ability to pay?” he added.

He criticized the Aquino administration for making social insurance systems more inaccessible and prohibitive. “Individual income earners, made up mostly of ordinary Filipino wage earners, are the ones who bear the brunt of everyday consumption taxes like the Value Added Tax (VAT) and sin taxes. Adding another tax responsibility to the ordinary Filipino wage earners will make them think twice about paying these voluntary contributions,” said Tinio.

It can be recalled that RMC 27-2011 issued by the BIR mandated the revoking of its previous rulings which excluded from the taxable income contributions to social insurance systems (Pag-Ibig 2, SSS, Life Insurance, Pre-Need Plan in the excess of the mandatory monthly contribution, GSIS Optional Insurance Premium, GSIS Educational Plan Premium, and GSIS Unlimited Optional Insurance Premium). A BIR official reasoned that the said policy was implemented ‘in view of abuses in granting income tax exemptions’ to the abovementioned social insurance systems.

Tinio challenged the Aquino administration to put forth pro-people directives in establishing a stable if not excellent fiscal situation.  “Impose greater taxes to corporate taxpayers and high-income individuals and ease burdensome tax responsibilities to those poor, ordinary Filipino wage earners,” he ended.

The ACT Teachers solon has filed a resolution calling for a House inquiry into the legal bases of the BIR memorandum circular.#



ACT Teachers Party-List Rep. Antonio L. Tinio (0920-922-0817)

Julie Anne D. Tapit, Media Officer (0915-762-6522)



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