Churches in Philippines to be Subjected to Taxes

Published 19 April 2005  |  
The Bureau of Internal Revenue (BIR) in the Philippines has announced that they will be sifting through the financial records of the nation's churches to find out whether they had been paying taxes from their revenues, as part of a new campaign against tax cheats.

The announcement has caused extrapolation of the political and religious scene. Administration Senator Joker Arroyo warned the government that imposing taxes on the commercial operations of the church may result in backlash if it failed to justify the plan.

As he stated, it was very surprising to him, since the Catholic Church, the Philippine Independent Church and various Christian churches, as well as the Iglesia ni Cristo, had not been subjected to taxes for over 100 years.

"Suddenly, the administration would do a far-reaching and disrupting turnaround. It would like to tax the commercial operations of the various churches, something the US colonial government, the Commonwealth government and the Republic of the Philippines never before imposed," Arroyo said yesterday in a statement.

Guillermo Parayno, BIR Commissioner said the religious leaders and their organisations were generally exempt from paying taxes, but sales of religious items, such as rosaries, rent from church lands or buildings and profits from other investments were not.

"Suspicions may arise that this is a counterweight to the churches' activism," Arroyo said.

"The BIR has already compiled a list of tax cheats since a month ago. I do not know the (BIR's) basis because we have long been implementing the Tax Code that exempts the Church from tax payments," Executive Secretary Eduardo Ermita said.

He said that BIR should first establish a legal basis for taxing the Church: "I'm sure (the BIR) has a basis and it is probably looking at the commercial side of religious groups, which I think should also be taxed," he said.

Different opinions have formed among the religious leaders as well. A Protestant bishop has expressed his disagreement: "I'm against it," Bishop Efraim Tendero, head of the Philippine Council of Evangelical Churches said.

"Even if a religious organisation engages in a revenue-raising activity, it should not be taxed as long as the money goes to the mission of the Church."

In addition, he declares this move is against the principle of the separation of Church and State.

Catholic Lingayen-Dagupan Archbishop Oscar Cruz is less perturbed: "I have no quarrel with that. We're also bound by the laws on taxation because we also benefit from government services. We also get service from the police and the fire department," he said.

But the government must know the difference between taxable and non-taxable incomes before it conducts its drive against supposed tax cheats in the Catholic Church and other religious organisations," he continued.

"This is not hard to know. It is the fault of the government when it does not collect correct taxes from taxable income or wrongly demands taxes from exempt revenues," Cruz said in a statement.

Cruz said Church policy, in fact, places its organisations under the civil law of the place where they operate.

Cruz commented that the Church was paying taxes from regular income (revenues from pieces of property leased to business establishments) in his archdiocese. But BIR may face the problem if it imposes taxes on transactions such as on the sale of rosaries and other religious items.

"Sometimes, what we earn here goes straight to charity," he said. "If we suddenly impose taxes on these transactions, it's the people benefiting from these charity works who will suffer."

On the other hand, Taha Basman, president of the Philippine Islamic Council and the Centre for Moderate Muslims in his statement to the imposing the taxes on church asked: "Why only now?"

"Muslims had long been not exempt from paying taxes yet the government is thinking of collecting from other religious groups just now. It's really unfair."

Tendero, whose group includes some 20,000 evangelical organisations nationwide said: "On our part, I can guarantee the government that our finances are above-board."

"We will not tolerate any abuses involving our finances. All donations and tithes go solely to our religious ministries," he said.

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