Press Release
March 26, 2009

Chiz calls for tax breaks for pre-need planholders
Cites IRS help for Madoff's victims

Sen. Chiz Escudero yesterday called on the government to include tax breaks for the thousands of pre-need planholders victimized by the collapse of firms like Legacy, Pacific Plans, Platinum, and the College Assurance Plan in its stimulus package.

"If you want to give them immediate relief, just like the displaced workers and the poor, this is probably the best way to do it," the opposition senator said.

"This is going to be a much-needed boost for these families who will once more face the spectre of paying tuition and other rising fees this coming school year," Escudero said.

The opposition senator cited the move of the US Internal Revenue Service to allow victims of Bernard Madoff's investment scam to claim tax deductions in time for the filing of income tax returns on April 15.

He said that IRS plan would benefit 13,000 investors in the Ponzi scheme that cost them about US$50 billion dollars. It was unveiled last week by US IRS chief Douglas Shulman during his testimony before the Senate Finance Committee, Escudero added.

In our case, Escudero said, a planholder only needs to present the pre-need policy and the tuition receipts for the last school year to the Bureau of Internal Revenue to qualify for tax relief.

"The government's failure, particularly the SEC's incompetence and alleged collusion with the pre-need firms, only makes it morally right to give these families a break at least this year or until the time when they are paid what is due them," he said.

Escudero said there is still time for the administration to work out details of the tax break before the income tax filing season ends on April 15

There are about 14,000 affected planholders who have lost at least 330 million pesos in investments with the bankrupt Legacy Group. On the other hand, about 34,000 planholders have claims against the Yuchengco-owned Pacific Plans, which was sold recently to another firm put up by investor Noel Onate for P250 million pesos.

The SEC has said that about 100,000 pre-need beneficiaries, including those serviced by the College Assurance Plans, could have stopped schooling since the crisis in the pre-need industry began in 2004.

According to estimates by the Parents Enabling Parents (PEP) Coalition, the claims of over a million pre-need planholders could amount to billions of pesos.

"The government can either give full or partial relief. But both options are better than no relief at all," said Escudero.

"I am sure that our finance managers can find a way to make up for the revenues that may be lost because of this tax relief. One thing they can do is plug the loopholes in the collection process," he added.

He also said that planned tax relief will complement other measures intended to cushion various sectors from the impact on the country by the global economic recession, like the proposed P6-B unemployment insurance fund for displaced workers as well as the reported promise of SEC chair Fe Barin to provide P150 million pesos to 20,000 pre-need planholders before June.

He said the idea of providing for unemployment insurance is worth looking into but the government must make sure that the "plan will not jeopardize the financial and actuarial health of the Social Security System (SSS)."

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