[Ask the Tax Whiz] How do we hold our government officials accountable?

Is the filing of the Statement of Assets, Liabilities, and Net Worth required for all government officials and employees? How about newly elected public officials? When is the deadline of filing SALNs? What should be disclosed in the SALN? Any penalties for non-compliance?

Pursuant to Section 8 of Republic Act (RA) No. 6713, public officials and employees have an obligation to accomplish and submit declarations under oath of their SALN and a Disclosure of Business Interests and Financial Connections, and those of their spouses and of unmarried children under 18 years old living in their households.

Newly elected public officials are also required to file their SALN with a Disclosure of Business Interests and Financial Connections within 30 days from the date of their assumption of office providing the following information:

1. real property, its improvements, acquisition costs, assessed value, and current fair market value
2. personal property and acquisition cost
3. all other assets such as investments, cash on hand or in banks, stocks, bonds, and the like
4. liabilities
5. all business interests and financial connections

All public officials and employees shall also execute, within 30 days from the date of their assumption of office, the necessary authority in favor of the Ombudsman to obtain from all appropriate government agencies, including the Bureau of Internal Revenue (BIR), such documents as may show their assets, liabilities, net worth, and also their business interests and financial connections in previous years, including, if possible, the year when they first assumed any government post.

Their SALN and Disclosure of Business Interests and Financial Connections must be filed on or before April 30, of every year thereafter. Violation of Section 8 or failure to file the SALN or dishonesty in doing so is punishable with imprisonment not exceeding five years or a fine not exceeding P5,000, or both, and, in the discretion of the court of competent jurisdiction, disqualification to hold public office. When warranted, it may also lead to forfeiture of ill-gotten or unexplained wealth.

What is the legal basis for requiring candidates and parties to submit a “full, true, and itemized” Statement of Contributions and Expenditures? If the political candidate or party did not receive any contribution or did not win the election, will they still be required to file their SOCE? Will failure to file their SOCE result in perpetual disqualification?

While Section 107 of the Omnibus Election Code has been repealed by Section 39 of RA 7166, Section 14 of RA 7166 still requires the filing of SOCEs. It states: “Every candidate and treasurer of the political party shall, within thirty (30) days after the day of the election, file in duplicate with the offices of the Commission the full, true and itemized statement of all contributions and expenditures in connection with the election.”

Regardless of the results of the elections or even if the candidates or parties concerned did not receive any contribution or make any expenditure, they should still submit their SOCEs reflecting such fact.

Failure to file SOCEs may lead to perpetual disqualification. Pursuant to Section 14 of RA 7166, “For the commission of a second or subsequent offense under this section, the administrative fine shall be from Two thousand pesos (P2,000) to Sixty thousand pesos (P60,000), in the discretion of the Commission. In addition, the offender shall be subject to perpetual disqualification to hold public office.”

Are there any prohibited contributions like from foreigners or foreign corporations? Is there a limit as to how much politicians can spend during the campaign? Are these grounds for disqualification?

Foreigners and foreign corporations cannot make contributions. Pursuant to Section 95 of the Omnibus Election Code, “no contribution for purposes of partisan political activity shall be made directly or indirectly by any of the following”:

1. Public or private financial institutions
2. Natural and juridical persons operating a public utility or in possession of or exploiting any natural resources of the nation
3. Natural and juridical persons who hold contracts or subcontracts to supply the government or any of its divisions, subdivisions or instrumentalities
4. Natural and juridical persons who have been granted franchises, incentives, exemptions, allocations or similar privileges or concessions by the government or any of its divisions, subdivisions or instrumentalities, including government-owned or controlled corporations
5. Natural and juridical persons who, within one year prior to the date of the election, have been granted loans or other accommodations in excess of P100,000 by the government or any of divisions, subdivisions or instrumentalities including government-owned or controlled corporations
6. Educational institutions which have received grants or public funds amounting to no less than P100,000
7. Officials or employees of the Civil Service, or members of the Armed Forces of the Philippines
8. Foreigners and foreign corporations

There are limits to campaign spending. Pursuant to Section 13 of RA 7166, candidates for president and vice president may spend up to P10 per registered voter, while political parties and independent candidates may spend up to P5 per registered voter. Local and other candidates may spend P3 for every voter registered in the constituency where he or she filed his certificate of candidacy. In excess of the campaign expenditure limit and those not duly reported in their SOCEs, it will be subject to 6% donor’s tax.

Pursuant to Section 264 of the Omnibus Election Code, any person found guilty of an election offense shall be punished with imprisonment of not less than one year but not more than six years and shall not be subject to probation. In addition, the guilty party shall be disqualified from holding public office and deprived of the right of suffrage. 

What are the tax obligations of politicians and/or political parties and party-list groups? Is tax clearance required from politicians and/or political parties and party-list groups to make sure they all complied and paid their taxes? Is it true that conviction due to a tax violation is ground for perpetual disqualification? 

As reiterated in Revenue Memorandum Circular No. 22-2022, all political parties, party-list groups, and campaign contributors are required to register with the BIR, issue official receipts, and withhold taxes pursuant to Revenue Regulations No. 8-2009, as amended by RR 7-2011 and other related revenue issuances.

Here are their tax obligations:

1. Unutilized/excess campaign funds, as well as donations utilized before the campaign period shall be subject to income tax
2. Campaign donations/contributions that have been utilized/spent before the campaign period shall be subject to 6% donor’s tax
3. Donations made by corporations in violation of Section 36(9) of the Corporation Code are subject to 6% donor’s tax and may not be deducted as political contributions on the part of the donor/corporation
4. Income payments made by political candidates and political parties/party-list groups on their purchases of goods and services as campaign expenditures shall be subject to 5% creditable withholding tax pursuant to RR 11-2018
5. Income payments made by individuals or juridical persons for their purchases of goods and services intended to be given as campaign contributions to political parties and candidates shall be subject to 5% creditable withholding tax pursuant to RR 11-2018
6. The following are considered among those covered by expanded withholding tax, but not limited to payments for: (a) media services, (b) printing jobs, (c) talent/entertainment fees, (d) rentals of both real and personal property/ies
7. Expenses that were not subjected to the 5% CWT are not considered utilized campaign funds for claiming such expenditures as deductions, and shall be subject to income tax as initialized campaign funds

Tax clearance is not required. However, candidates and treasurers of political parties and party-list groups are required to submit their SOCE to the BIR through the revenue district office where they are registered within 30 days after the elections.

Being convicted of a tax violation may result in perpetual disqualification. Pursuant to Section 253(c), “If he is a public officer or employee, the maximum penalty prescribed for the offense shall be imposed and, in addition, he shall be dismissed from public service and perpetually disqualified from holding any public office, to vote and to participate in any election.” – Rappler.com

Mon Abrea, CPA, MBA, is the co-chair of the Paying Taxes-EODB Task Force. With the TaxWhizPH mobile app as his brainchild, he was recognized as one of the Outstanding Young Persons of the World, an Asia CEO Young Leader, and one of the Ten Outstanding Young Men of the Philippines because of his tax advocacy and expertise. Currently, he is the chairman and CEO of the Asian Consulting Group and trustee of the Center for Strategic Reforms of the Philippines – the advocacy partner of the Bureau of Internal Revenue, Department of Trade and Industry, and Anti-Red Tape Authority on ease of doing business and tax reform. Visit www.acg.ph for more information or email him at mon@acg.ph and download the TaxWhizPH app for free if you have tax questions.