MANILA: Employees in the Philippines are likely to see additional deductions from their monthly salaries to be put for retirement as the country’s Bureau of Internal Revenue (BIR) finally gave the long-delayed go-ahead to a savings program passed in 2008.
The go-signal was issued through Revenue Memorandum Order 42-2016 that laid out reportorial requirements for Republic Act 9505 or the Personal Equity and Retirement Account (PERA) Law, reported Philippine Star.
“With the engines all set out for the proper implementation… many employers are expected to take this opportunity to become an agent…to promote capital market development and savings mobilization,” the order reportedly stated.
“Employees, including self-employed individuals and overseas Filipinos, can start planning their future by establishing their own PERA,” it added.
PERA establishes a retirement system where contributions are made by both employers and employees. The contributions are managed and invested by an “administrator” chosen by the employee. Any person may only have a maximum of five PERA accounts cumulatively worth up to PhP200,000.
Reportedly, contributors are entitled to income tax credit every year worth five percent of his or her annual contributions.
PERA will come on top of existing contributions to pension funds Social Security System and Government Service Insurance System, said the news portal.
The Employers Confederation of the Philippines declined to comment on possible additional costs to employers.
The measure is also reportedly considered revenue eroding, with original government estimates of P12 billion lost per year.
“We believe that the long-term benefits of the PERA would outweigh the revenue loss,” Benedict Tugonon, president of tax industry group Tax Management Association of the Philippines, was quoted as saying.
Under the order, PERA administrator will need to apply before the BIR’s Audit, Information, Tax Exemption and Incentives Division, where they will also submit quarterly and annual reports.
Reports will contain PERA transactions, including contributions, income earned, assets where it is invested, early withdrawals and terminations by contributors.
They are also tasked to maintain a “record” of all these information. BIR and the Bangko Sentral ng Pilipinas (BSP), meanwhile, will establish network connectivity for monitoring, reported Philippine Star.
“Even with this order, PERA could not be implemented without administrators applying before BSP,” former BIR commissioner Kim Henares reportedly said.
BSP deputy governor Nestor Espenilla Jr. said the central bank has approved two administrators so far.
Finance Secretary Carlos Dominguez III had made it his priority to implement PERA during the first six months of the Duterte administration.
Henares reportedly said she did not intentionally delay PERA’s issuance because it will decrease revenues.
“I was supposed to sign it after April 15 to avoid confusion in income tax payments. That was the same draft signed now,” she was quoted as saying by Philippine Star.
