Proposed Income Tax for OFW

Study proposes taxing OFW income

The government should tax income remittances from overseas Filipino workers (OFWs) and use the proceeds to shore up the productivity of workers left behind, a study by De La Salle University's business and economics experts has proposed.The research, titled "The Economic Impacts of International Migration: A Case Study on the Philippines," written by Tereso Tullao, Michael Angelo Cortez and Edward See, said: "The possibility of increasing and internalizing the cost of international migration may be considered to reduce the economic ills it has generated. Such a move can arrest the possible hollowing effects on industries and mitigate the loss in international competition."The study suggested that these same remittance incomes pouring into the country had nurtured dependence, contributed indirectly to the contraction of industries and developed a culture of migration among Filipinos.One way of compensating the country for the loss of migrants who attended government-funded state universities and colleges, the study said, would be to oblige them to compensate for the cost of their education."Another option is to impose some form of exit tax on migrating workers like nurses whose massive exit has affected nursing education as well as the health sector of the country," said the study, which was presented during a recent international forum on labor migration conducted by the National Economic and Development Authority.It acknowledged that the huge amount of remittances sent by OFWs as captured in official central bank statistics and a substantial amount unaccounted for that flows through the various informal channels had contributed significantly to the growth and stability of the national economy in recent years. But instead of alleviating unemployment, it argued that international migration has reduced the demand and supply of labor."International migration has increased the reservation wage of individuals coming from households with remittance income," the research said.The study also said that temporary overseas employment had the potential of depressing domestic industries and contracting employment similar to the consequence of the "Dutch disease," referring to a situation in which dependence on a natural resource could erode competitiveness."The phenomenon of international migration, more particularly, temporary overseas employment, has also reduced self-reliance among individual members of the households. This has been shown in the long-term consumption pattern of households," the research said.It added that the reduced labor force participation of family members with remittance income can be interpreted as another manifestation of dependence.