Two Mindanao lawmakers are seeking the removal of the tax exemption of sweepstakes and lotto winnings in the country to help raise the much needed tax revenues for the government.
According to Reps. Rufus Rodriguez (2nd District, Cagayan de Oro City) and Maximo Rodriguez Jr. (Party-list, Abante Mindanao), there is no reason why the Philippine Charity Sweepstakes and lotto winnings cannot be taxed since the law provides that prizes and winnings are taxable.
Both solons referred to Republic Act 8424 otherwise known as the Tax Reform Act of 1997, which provides the general definition of the taxable "gross income" in Section 32.
The law defines the taxable gross income as all income derived from whatever source, including but not limited to compensation for services in whatever form paid, including, but not limited to fees, salaries, wages, commissions, and similar items; gross income derived from the conduct of trade or business or the exercise of a profession; gains derived from dealings in property; interests; rents; royalties; dividends; annuities; prizes and winnings; pensions; and partner's distributive share from the net income of the general professional partnership.
The solons also noted the taxes that can be imposed on huge jackpot prizes could amount to much needed revenues for the government. There are instances when the jackpot prizes for the numbers game lotto reached hundreds of millions of pesos, and it is common for lotto jackpot prizes to hit P100 million, P200, P300 million and higher according to them.
In the most recent case of the balikbayan winner of the P741 million jackpot, the US government received over P200 million as tax revenues because the winner is a US citizen. That P200 million could have instead gone to the Philippine government if only lotto winnings were taxed in the country, according to the solons.
The solons' proposal would entail further amendment to RA 8424, particularly Section 24 on Income Tax Rates and Section 25 on Tax on Non-resident Alien Individuals, which currently provides for the tax exemption of the Philippine Charity Sweepstakes and lotto winnings.
In House Bill 4832, the solons proposed an amendment to Section 24(B)(1) of RA 8424 on Interests, Royalties, Prizes and Other Winnings, so that "A final tax at the rate of 20 percent is hereby imposed upon the amount of interest from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements; royalties, except on books, as well as other literary works and musical compositions, which shall be imposed on a final tax of 10 percent; prizes (except prizes amount to P10,000 or less which shall be subject to tax under Subsection (A) of Section 24; and other winnings, derived from sources within the Philippines."
The bill also provides for the amendment of Section 25(A) (2) on "Cash and Property Dividends from a Domestic Corporation or Joint Stock Company, or Insurance or Mutual Fund Company or Regional Operating Headquarters or Multinational Company, or Share in the Distributable Net Income of a Partnership (Except a General Professional Partnership), Joint Account, Joint Venture Taxable as a Corporation or Association, Interests, Royalties, Prizes, and Other Winnings. Cash and property dividends from a domestic corporation, or from a joint stock company, or from an insurance or mutual fund company or from a regional operating headquarter of a multinational company, or the share of a nonresident alien individual in the distributable net income after tax of a partnership (except a general professional partnership) of which he is a partner, or the share of a nonresident alien individual in the net income after tax of an association, a joint account, or a joint venture taxable as a corporation of which he is a member or a co-venturer; interests; royalties (in any form); and prizes (except prizes amounting to P10,000 or less which shall be subject to tax under Subsection (B)(1) of Section 24) and other winnings; shall be subject to an income tax of twenty percent (20%) on the total amount thereof."
The bill provides that the PCSO and the Bureau of Internal Revenue shall issue the rules and regulations necessary for the full implementation of the Act.
Source: http://www.congress.gov.ph
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