BIR Goes After Tax Cheats Disguised as Religious, Charitable Institutions

Monday, June 7th, 2010

LEGAZPI CITY --- Foundations, religious and charitable organizations operating hospitals, and educational institutions are at risk losing their tax exemption privileges once they are found to have violated or abused the rights and privileges given them by the state.

The Bureau of Internal Revenue (BIR) in Bikol, in its recent tax audit study found out that some religious and charitable institutions are using their tax exemption privilege in defrauding the government of hundreds of millions of pesos in tax revenues.

Lawyer Diosdado Mendoza, BIR regional director, stated that they would be running after these religious and charitable institutions that abuse their tax exemption rights as part of their intensified campaign against tax cheats.

Mendoza explained that under the Internal Revenue Act, organizations registered with the Securities and Exchange Commission (SEC) as foundations, religious and charitable institutions that operate hospitals, educational institutions and other business ventures primarily for charitable and religious purposes are exempted from paying income taxes.

Mendoza, however, warned that these privileges are not automatic and absolute as other revenue measures such as taxes on contracts, suppliers' and employees' withholding tax including professional fees of physicians, artists and other special job contracts are not covered by the exemption.

For this reason, the BIR recently launched a tax campaign drive, dubbed "Tax Me Not" Program which is designed to check tax exemption violations and abuses by religious and charitable organizations running hospitals, universities, colleges and other businesses.

The campaign is expected to boost government tax collection in Bikol, including the agency tax goal pegged at P4.4 billion this year, Mendoza said.

The BIR claimed that some hospitals ran by religious and charitable institutions do not provide charity ward facilities or charitable activities, which are requirements for them to enjoy tax exemption privileges.

As for the educational institutions, the BIR noted that many of these institutions have been imposing excessive tuition and miscellaneous fees on their students. "They (institutions) even fail to declare and submit the list of scholars sponsored by the institutions and other charitable activities undertaken by the school as required by law," Mendoza said. (PNA)