FEB.

5, 2014

NR # 3368

House leader seeks changing of exorbitant Estate Tax to more reasonable Inheritance Tax
A House leader is seeking a change of the exorbitant Estate Tax to the more reasonable Inheritance Tax, and the exemption of certain donations from taxation to preserve inheritances and the Filipino culture. Rep. Al Francis ichara !"nd #istrict, Alba$% raised the proposal through House ill &'(&, sa$ing the Inheritance Tax s$stem is more reflective of the Filipino culture, and more realistic as far as the financial status of most Filipino families are concerned. ichara, chairman of the House committee on foreign affairs, said it is a fact that most Filipino families are una)are of the existence of estate taxes imposed b$ la) upon the estate of a decedent. In some cases )here the heirs are made a)are of the taxes the$ have to pa$, those )ho can afford the exorbitant rates pa$ the taxes )ithin the prescribed period to avoid further penalties. Ho)ever, he said those )ho have no means to pa$ the taxes end up either selling a substantial portion of the estate to settle the taxes or postponing indefinitel$ such pa$ment until it is too late and the penalties have made the pa$ment too burdensome that the heirs end up selling entire properties )ith the bu$ers shouldering the tax deficiencies. *In most cases, heirs lose substantial portions if not entire properties to satisf$ tax obligations,+ said ichara. He cited for instance the land distributed to individual tenant farmers under the ,omprehensive Agrarian reform -rogram !,AR-%. *It take $ears before the farmer can actuall$ pa$ back the government, $et in several cases, even before the farmer can full$ satisf$ his obligations, he has alread$ passed a)a$ and left the small land to his famil$,+ he said. ,omplications arise )hen the heirs need to transfer the o)nership of the land to be able to legall$ assume the pending obligations of the decedent, according to ichara. *Aside from having almost nothing to pa$ for the land and the real propert$ taxes that go )ith it, the$ )ill no) have to look for additional resource to satisf$ the exorbitant estate tax if the$ don.t )ant to lose the onl$ propert$ that the$ ma$ ever o)n. Thus, most of them end up selling the land )hile it still has value and before it is eaten up b$ the unpaid taxes and amorti/ation pa$ments,+ ichara said.

0uch realit$ is not in consonance )ith the Filipino culture, ichara said, because heads of families )ork hard to be able to leave to their loved ones substantial inheritance )hich the$ can in turn transfer to their descendants and so forth. *The exorbitant tax rates prevent this scenario from coming to pla$. Real propert$ taxes )ill continue to be paid b$ the ne) registered o)ners or heirs, as )ell as other taxes incidental to o)nership of properties. Thus, perhaps it is even more beneficial in the long run to do a)a$ )ith estate taxes to preserve inheritances and our culture,+ he said. ichara said the same is true for donor.s taxes, if the donations are made )ithin and among famil$ members, such should be tax exempt. *0hould it be allo)ed, such practice )ill avoid tedious accounting of estates in cases of intestate succession, not to mention the bitter in1fighting among heirs, if most or all of the properties of the decedent have alread$ been distributed among the heirs )hile he )as still alive,+ said ichara. House ill &'(&, no) pending at the House committee on )a$s and means chaired b$ Rep. 2iro 3uimbo !"nd #istrict, 2arikina ,it$% provides for the further amendment of 0ection 45 of Republic Act 45"5, other)ise kno)n as the 6ational Internal Revenue ,ode !6IR,%, as amended, so that on Inheritance Tax, *-roperties inherited b$ the spouse, children, parents, and sibling from a decedent, )hether resident or non1resident of the -hilippines, shall be exempt from tax. In all other cases, a tax of three percent shall be imposed on the net value of the inheritance. 0uch tax must be settled, and a certification to that effect must be issued b$ the Internal Revenue ,ommissioner, before the transfer of o)nership or possession of the inheritance ma$ be effected.+ The bill also seeks the amendment of 0ection 77!A% and ! % of the 6IR,, as amended, so that !A% If the #onee is a relative, charitable or religious institution, or government, *8hen a #onee or beneficiar$ is the spouse, children, parents, siblings, an$ charitable or religious institution, or an$ government entit$, the donation shall be tax1 exempt+ and ! % 8hen the #onee or beneficiar$ is a stranger, the tax pa$able b$ the donor shall be three percent of the total value of the gifts. For the purpose of this tax, a stranger is an$ person not included in the preceding enumeration.+ !&9% rbb