DOF agrees to exempt Pag-IBIG Fund from income tax payment

The Department of Finance (DOF) has agreed to exempt the state-owned Home Development Mutual Fund (HDMF) or Pag-ibig Fund from paying the income tax saying that this would help strengthen the agency.

In a position paper on a bill seeking to strengthen HDMF, the DOF said it has agreed to exempt the agency from income tax.

The DOF stressed, however, the DOF is not setting any precedent with respect to the tax treatment of other government corporations.

Instead, the DOF said this would only be for HDMF so that it would help the agency strengthen its financial position.

It said that granting tax exemption to HDMF would enhance the financial capability of the agency to meet its dividends obligations to its members.

“It should be noted that the amount of dividend declaration is dependent on the Fund’s financial position, which in turn, is affected by the Fund’s financial obligations, including tax,” the DOF said.

At present, the agency is subject to taxes, particularly income tax but it regularly applies for tax subsidy through the Fiscal Incentives Review Board to meet its obligations to the government.

From 1998 to 2008, the HDMF applied for tax subsidy with the interagency Fiscal Incentives Review Board (FIRB) amounting to a total of P8.1 billion, representing its income tax liabilities for the period.

This year, HDMF is eyeing to raise P8 billion in revenues on expectations that more members will avail of home loans.

The 2008 revenue projection is slightly higher than the P7.4 billion recorded last year and the P7.9 billion recorded in 2006, data from the agency showed.

For 2009, the agency expects revenues to hit P10.5 billion to P11 billion if agency’s exemption from payment of corporate income tax is implemented.