JULY 6, 2011

NR # 2457

Solon: Lift limit on number of dependents a taxpayer can declare for more tax exemption
A House leader is seeking the removal of the current limit of four dependents that may be declared by a taxpayer in claiming additional tax exemption, thereby help reduce poverty incidence among Filipino families. Rep. Hermilando Mandanas (2nd District, Batangas), Chairman of the House Committee on Ways and Means, said the additional exemption would entail more savings for Filipino families, which can be used for their more pressing needs such as food, shelter, and education, among others. This would ultimately redound to the benefit of the Filipino family and the country, Mandanas said. Based on studies and statistics in the past 10 years, Mandanas said poverty incidence, poverty gap, severity of poverty, mean vulnerability and vulnerability incidence are directly proportional to family size. As such, large families tend to become the most vulnerable group having the smallest per capita expenditures and per capita savings. Hence, the bigger the family size, the higher the cost of living, Mandanas explained. He said given the high cost of living, Filipino families grapple with the basic concern of meeting their needs on a daily basis. The 2009 Family Income and Expenditure Survey (FIES) showed Filipino families, on the average, annually earned and spend P206,000 and P176,000, respectively, according to him. Inversely, this means a measly annual family savings of P30,000 for the said year. Such is the predicament that present-day Filipino families face, and as their size increases, so are their woes, said Mandanas. It is on the account of alleviating the plight of Filipino families, especially large ones that Mandanas said he filed House Bill 4793, which seeks to amend Section 35(B) of Republic Act 8424 otherwise known as the National Internal Revenue Code of 1997, as amended by RA 9504. With the proffered legislations features, poverty incidence among Filipino families shall be reduced as there will be more savings that can be used for more pressing basic needs. These features include removing the present limit of four as to the number of dependents who may be declared for purposes of claiming additional exemption;

classifying as dependents, parents and legitimated children subject to qualifications or conditions; and allowing in certain situations legal guardians to persons with mental or physical defect to claim the additional exemption for said dependents, said Mandanas. Section 1 of the bill provides for the amendment of Section 35(B) on allowance of personal exemption for the individual taxpayer. The amendment provides that the term dependents shall mean One or more unmarried legitimate, legitimated, illegitimate or legally adopted child not more than 21 years of age, living with the taxpayer, not gainfully employed and dependent upon the latter for chief support, or where such child, regardless of age, is incapable of self-support because of mental or physical defect. Dependents shall also mean A parent or both parents, living with the taxpayer, not gainfully employed, and dependent upon the latter for chief support, or where such parents are incapable of self-support because of mental or physical defect or old age. The bill further provides An individual taxpayer who is the legal guardian to a person with mental or physical defect, regardless of age and incapable of self-support, may claim the additional exemption for the said dependent provided, that only the legal guardian can avail of the additional exemption for a particular taxable year to the exclusion of the biological parents. Section 2 provides notwithstanding the penalty provided for in Section 267 of the NIRC of 1997, as amended, any person who declares fictitious dependents, shall upon conviction, be liable for the payment of a fine equivalent to thrice the amount of tax, interest and surcharges due from the taxpayer. Section 3 provides the Department of Finance, in coordination with the Bureau of Internal Revenue and the Department of Social Welfare and Development, shall issue the necessary implementing rules and regulations within 30 days upon the approval of the Act. (30) rbb