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MANILA, Philippines – Three winning senatorial candidates and three individuals running for national office in the May 2022 elections have declared excess campaign funds, according to a review of campaign finance records by the Philippine Center for Investigative Journalism (PCIJ ).
Senators Alan Peter Cayetano, Joel Villanueva, and Francis Joseph “Cheese” Escudero reported expenses below the contributions they received, resulting in P9.9 million, P4.1 million, and P702,457 in excess donations, respectively.
No specific election law dictates what candidates must do about excess contributions. But if the amount is accepted as income, the applicant must report it to the Bureau of Internal Revenue (BIR) and pay the corresponding income tax.
In a letter to the PCIJ, Escudero said he would pay income tax on the excess donations he kept.
“(T)he excess amount of P702,457.57 has been made transparent and duly accounted for as already appearing in my Statement of Contributions and Expenses (SOCE),” he wrote on September 22, 2022.
Escudero said “the surplus fund is subject to income tax, which will be paid promptly as provided by law or upon the filing and filing of my 2022 annual tax return.”
In response to PCIJ inquiries, Alfredo Labrador V, Cayetano’s chief of staff, said the senator’s remaining fund of P9.9 million is being spent on his privately funded Sampung Libong Pag-asa and Emergency Response programs. He said this was done “by prior agreement with [the senator’s] donors.”
Sampung Libong Pag-asa, Labrador wrote, provides “cash assistance to needy households” across the country. The Emergency Response Program is a donation drive that provides food and non-food aid to people affected by disasters.
PCIJ also sent a request for comment to Villanueva to find out what he did with his remaining campaign funds. At the time of publication, we have not received a response.
The other candidates who reported excess donations were former Akbayan Rep. Walden Bello, former Sen. Leila de Lima, and Roy Cabonegro. Bello ran for vice president, while De Lima and Cabonegro contested for a Senate seat. PCIJ has yet to hear back from the three. (See Table 1.)
The Statements of Contribution and Expenditure or SOCE of these six individuals do not show any outstanding dues, meaning the remaining amount will not be spent on any election expenses.
In the Summary Form (Form 1) of his SOCE, former Ifugao Rep. Teodoro Bagillat Jr. declared that he received P2,400,274.88 and spent P52,115.01 of his personal funds. Although it may appear that he has excess funds, his Statutory Expenditure Statement (Form 4) shows that he spent P2,452,860.89. His staff told PCIJ that it was paid for through donations. The amounts resulted in a zero balance or no surplus funds.
Presidential candidates Ferdinand “Bongbong” Marcos Jr. and Panfilo Lacson and Senator Guillermo Lorenzo Eleazar also realized surplus funds but reported liabilities or expenses that have yet to be paid. (See Table 2.)
Marcos has yet to pay P27.5 million worth of election expenses, according to his SOCE filed on June 7, 2022. Lacson and Eleazar, meanwhile, still have P619,493.34 and P1.65 million respectively. in unpaid debts
(PCIJ obtained access to SOCEs filed by national candidates. There is no information on who reported excess donations locally.)
Elections as a money-making venture?
Eric Jude Alvia, secretary-general of the National Civil Movement for Free Elections (Namfrel), said the problem of excess funds continues to recur because no law stipulates how a candidate should use additional campaign funds.
Section 5 of Comelec Resolution No. 9991 offers a rule on what to do with surplus funds if treated as income: payment of tax. The resolution states that any “unspent balance of any contribution to a candidate or party, also known as excess contributions, is subject to income tax.”
Efraim Bag-id, director of the Comelec Campaign Finance Office (CFO), said the BIR will do a cross-check by obtaining copies of the candidates’ SOCEs.
Section 2 of BIR Revenue Regulation No. 7-2011 states that “campaign contributions, net of campaign expenses of the candidate, shall be deemed subject to income tax and as such shall be included in the taxable income of the candidate as is stated in his/her Income Tax Return (ITR) filed for the relevant tax year.’
However, the Namfrel national chairman, Angel Averia Jr., said whatever money was withheld by the candidate from campaign contributions should not be treated as personal income.
“They either give it back to the donors or donate it to the party,” he said.
Averia said windfalls from excess campaign funds are one reason many people run for office even if they are unlikely to win.
“There should be rules on how contributions will be treated. If it goes to the party, the party can keep the surplus for its operationscan defined where will the money go (the money will go to something specific),” he said.
Alvia, also from Namfrel, said there should be an express understanding between applicant and donor on what to do with surplus funds.
“That’s why there’s also a lot of unsavory candidates because that’s their drive there, their motivation there is that [to] increase incomes. “I win, I lose, it’s okay. i made money (There are a lot of unsavory applicants because there is an incentive. Their motivation is to increase income. ‘Win or lose, it’s fine. I made money either way,’) he said.
Elections attorney Emil Maranon III pointed out that election law restrictions only apply to spending, not contributions.
By default, donations are subject to a 6% gift tax, but become tax-free when given to support an election campaign.
“So to get around the law, all you have to do is overpay. Because, remember…there [are] there are no contribution limits. The limitation is in the cost. So [that means] you (donor) can donate P50 billion and [candidates] spend P1 million. It is legally possible. And remember, when you donate P50 billion, it is tax-free. So that’s a loophole,” he said.
Isco and Mikey
In 2016, the PCIJ reported that 13 candidates and four parties realized a total of P69.33 million in excess funds during the May national elections. Among those candidates was Francisco “Isco Moreno” Domagoso, who reported P50.8 million in excess funds. Then a senatorial candidate, Domagoso said he treated the rest of the money as income and paid P9.7 million in taxes to keep the amount.
In 2016, then senatorial candidate Lacson also declared excess donations of P2.54 million. He told the PCIJ that he had returned the excess amount to his donors.
In 2009, Pampanga Representative Juan Miguel “Mikey” Arroyo, son of former President Gloria Macapagal-Arroyo, said in an interview that he was able to acquire a beachfront house in Foster City, California worth $1.32 million , using their wedding gifts and campaign contributions.
Vera Files later reported that Arroyo’s contribution and expense reports for the last two congressional elections showed zero donations to his campaign, which he reported was financed out of his own pocket.
The BIR at the time discovered tax lapses after reviewing Arroyo’s Statement of Assets, Liabilities and Net Worth (SALN) from 2004 to 2009 and his income tax returns filed for certain years during the same period.
The BIR accused Arroyo of understating his taxable income and filed a complaint with the Department of Justice in April 2011. However, the Court of Tax Appeals acquitted Arroyo in May 2018, noting that the case was based only on “mere speculations and probabilities. “
Necessary law
Arvin Serrano, a board member of the Parish Pastoral Council for Responsible Voting, said legislation is needed to address campaign finance and other election issues, including what to do with excess funds.
In the 19th Congress, several bills were introduced in the House of Representatives to amend Batas Pambansa Bilang 881 or the Omnibus Election Code. Many of these bills were related to the postponement of the December 2022 Barangay and Sangguniang Kabataan elections. But there were also measures to increase campaign spending limits, ban replacement candidates due to withdrawal, ban acts of premature campaigning and define the use of the Internet and social media in legal campaign propaganda.
In the Senate, Senator Imee Marcos introduced a bill for a new Omnibus Election Code. The measure includes a provision on excess funds, but only repeats the existing rule that any remaining contribution is subject to income tax unless the candidate, political party or party-list group returns unused funds to donors.
Marcos, the president’s older sister, chairs the Senate Committee on Electoral Reforms and People’s Participation. – with additional reporting and research by Erika Pearl Aguilar and Carmela Fonbuena, PCIJ/Rappler.com
Republished with permission from the Philippine Center for Investigative Journalism.
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