2002 General Appropriations Act threatens insurers, banks

More than 51 private institutions contributing billions of pesos to the government coffers through various taxes will be displaced with the removal of the payroll deduction facility originally found in Section 36 of the proposed national budget for next year.

Under the original Section 36, teacher’s salary deductions for loans, insurance and such transactions can be made through the Department of Education Culture and Sports (DECS). The privilege covers government banks, the Government Service Insurance System (GSIS), insurance companies, and savings and loan associations.

However, in the revised version of Sec. 36 salary deductions not only teachers but all government employees can only be undertaken for government agencies like GSIS and the Bureau of Internal Revenue (BIR). The private sector was totally negated.

"The modification is consistent with the policy of the government to limit deductions from salaries of government officials employees to prevent abuse," authors of the revision said.

Immediately affected by the revised section are 24 insurance companies and 27 savings and loans associations, thrift and savings banks, and cooperatives. These institutions are extending various types of loans, issuing life insurance policies, non-life insurance policies for fire, accident, etc. to at least 400,000 teachers scattered nationwide.

Last year, the insurance sector alone accounted for a combined P49.12-billion worth of premiums broken down to P25.56 billion in life premiums and P23.56 billion for the non-life sector. They contributed roughly P4 billion in various taxes like the premium tax and the documentary stamp tax (DST) in the same period.

In fact, the DECS also earns P6.8 million every month in sevice fees from the salary deduction of teachers for payment of insurance premiums.

Initial studies however show that the thrift and savings banks, cooperatives, and government banks account for a bigger portion of the salary deduction program with the DECS.

Philippine American Life and General Insurance Co. (PhilamLife) and president and chief executive officer Jose Cuisia Jr. argued that salary deduction facility would not affect the take-home pay of the teachers.

Cuisia said that deductions for insurance premiums represents only a minute portion of the teacher’s salary deductions loans represented more than 50 percent of the regular deductions.

The monthly deductions from the teacher’s salaries average P180 while deductions for lending institutions charge more than 18 percent of their monthly pay.

The facility is also legally blessed by Section 21 of Republic Act (RA) 4670 otherwise known as the Magna Carta for Public School Teachers.

"The imposition of the revised Section 36 of the General Appropriations Act may result in serious legal issues that may disrupt the passage of the 2002 national budget," industry source told The STAR.

Meanwhile, Payroll Deduction Insurance Association (PDIA) president Rafael Uyguanco said that in the past five years, insurance companies have extended a total of P230-million claims to public school teachers.

Uyguanco pointed out that the privilege to undertake salary deductions has been around for 30 years.

"We believe that rending the DECS deduction facility inaccessible is unfair not only to us, but also to hundreds of thousands of teachers who would want to buy protection through the deduction facility," the PDIA added.

The PDIA also warned that the removal of the salary deduction facility with government agencies could cause serious implication to the lives of millions of government employees.