Sponsorship Speech by Sen. Ralph G. Recto
Senate Bill No. 2855 (Additional Relief to Families Act)

Mr. President, my esteemed colleagues: It is my privilege to sponsor a bill that honors the State’s commitment to strengthen the family as the foundation of the Filipino nation.

I refer to Senate Bill No. 2855 under Committee Report No. 43 with its short title “Additional Relief to Families Act”.

This bill amends Section 35 paragraph B of the National Internal Revenue Code of 1997, as amended by Republic Act No. 9504.

Mr. President, please allow me to present the salient features of Senate Bill No. 2855, as follows:

One: We propose to remove the limitation on the number of qualified dependents that a taxpayer may claim for tax deduction.

At present, a maximum of only four (4) qualified dependents may be claimed by qualified taxpayers as additional exemption at P25,000 per capita.

This cap on the number of dependents was established in 1973 under Presidential Decree 69. At that time, in addition to generating more revenues, the government was bent on promoting family planning that, in effect, encourages the number of children for each family to only four.

Mr. President, the Committee’s rationale for removing the limitation on the number of qualified dependents for tax purposes is that we believe, and we find support from economists that setting a limitation on the number of dependents has no bearing on the decision of couples to beget children.

In other words, a couple is not motivated to bear children simply because they can include them as dependents when they file income tax returns. In like manner, a couple is not discouraged from bearing children in excess of four because they can no longer claim additional exemption. The tax code only discriminates against large families.

May I also call attention to the fact that those in the higher income levels have fewer children than those in the lower income groups. According to the Commission on Population, only women in the lowest and second lowest wealth quartile have four or more children – and these groups are not even income taxpayers, Mr. President, and distinguished colleagues.

Two: We propose to include the category of LEGITIMATED children in the ambit of qualified dependent children in order to harmonize the Tax Code provision with the Family Code of the Philippines, as amended by Republic Act No. 9858, whereby a child conceived and born outside of wedlock of parents, under certain conditions, may be legitimated.

Three: Mr. President, we likewise propose to expand the coverage of qualified dependents to include PARENTS OR BOTH PARENTS with the following conditions: The parent or parents should NOT BE GAINFULLY EMPLOYED, they should be LIVING WITH THE TAXPAYER, and DEPENDENT UPON THE TAXPAYER FOR CHIEF SUPPORT; or such parent or parents, REGARDLESS OF INCOME, ARE INCAPABLE OF SELF-SUPPORT BECAUSE OF MENTAL OR PHYSICAL HANDICAP.

Four: We also propose to allow a taxpayer who acts as LEGAL GUARDIAN OF A PERSON WITH MENTAL OR PHYSICAL HANDICAP, REGARDLESS OF AGE AND INCAPABLE OF SELF-SUPPORT, TO 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.

Mr. President, it must be emphasized that the present charters of the Philippine Health Insurance Corporation (PhilHealth), Government Service Insurance System (GSIS) and the Social Security System (SSS) do not impose a cap on the number of dependents that can be claimed by the member. Likewise, parents and legitimated children are included as qualified dependents subject to certain conditions as stipulated in their respective charters.

This bill, therefore, is essentially in conformity with the existing identification of dependents as provided in our social security laws. Hence, the impact of this bill is on the economic reprieve that will be granted to families – alleviating the financial difficulties of taxpayers with more children, and allowing individuals to cope with the cost of caring for parents and legitimated children or those children with disabilities.

As in all negative tax proposals, there is a concomitant revenue loss. I assure you, however, Mr. President, and as we are well aware of, those in the higher income levels have fewer children than those in the lower income groups. As such, Mr. President, even if we scrap the limitation of four dependents, it is unlikely that income tax revenues would suffer a big dent.

Moreover, Mr. President, the age-limitation factor of 21 years old still remains in Section 35 of the Tax Code. As such, children who reach the age threshold will cease to become a dependent as they reach the age of 21, barring any mental or physical handicap.

Also, Mr. President, the fear of tax base erosion due to fictitious claims of qualified dependents is no longer a critical issue because the Bureau of Internal Revenue now requires birth certificates issued by the National Statistics Office to support claims for tax deduction.

Mr. President and esteemed colleagues, your vote for this bill will be tantamount to championing the cause of the mentally and physically challenged and those who take care of them. Likewise, it will mean our support to taxpayers who have unselfishly taken the cudgels of caring for dependent parents. Passing this bill will certainly alleviate the plight of many families.

Premises considered, Mr. President and my dear colleagues, your approval of Senate Bill No. 2855 under Committee Report No. 43 is earnestly sought. Thank you very much.

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