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Are corporations really allowed to donate to a candidate or political party?
Under Section 36 (9) of the Corporation Code of the Philippines (CCP), corporations are allowed to make reasonable donations, including those for the public welfare or for hospital, charitable, cultural, scientific, civic, or for similar purposes, provided that no corporation, domestic or foreign, shall give donations in aid of any political party or candidate or for purposes of partisan political activity. It seems that based on this provision, there is an absolute prohibition for corporations to donate campaign funds or make political contributions.
However, under Section 95 of the Omnibus Election Code (OEC), only certain corporations or juridical entities are prohibited to make such donations. These include public or private financial institutions, and juridical persons operating a public utility or in possession of or exploiting any natural resources of the nation.
Is there a conflict between these two laws? If yes, which provision would prevail?
In an opinion issued on 27 July 2015, the Office of the General Counsel of the Securities and Exchange Commission (SEC), shed light on these seemingly conflicting provisions.
The SEC clarified that the provision of the CCP was not specifically repealed nor amended by Section 95 of the OEC. Neither has there been an implied amendment or repeal of the Corporation Code provision. There is no conflict between the two provisions and both can be harmonized and be given effect insofar as the CCP provides a blanket prohibition on all corporations making political contributions, while the OEC imposes the same prohibition on all natural or juridical persons falling under specific categories. The SEC further opined that if they are to harmonize and give effect to both laws, it is prudent to uphold the absolute prohibition on donations to any candidate or political party or for purposes of partisan political activity by any and all corporations.
The SEC explained that Section 95 of the OEC should be appreciated as an amplification of the absolute prohibition contained in the CCP and is actually illustrative of some specific circumstances of the evil sought to be avoided in both laws.
However, it can also be argued that a corporation may still donate now without violating the Corporation Code provision. In a 2009 Supreme Court (SC) ruling, the SC held that a person who files a certificate of candidacy is not a candidate until the start of the campaign period. Thus, a corporation may still fund the infomercials of an aspirant, regardless of whether or not such aspirant plans to run, or has already declared his candidacy, provided it is done before the campaign period. However, if the donation was made to a political party, then there may already be a violation of the CCP.
Another issue, however, would be if a corporation were to donate to a person to fund his infomercials today, prior to the start of the official campaign period, would it be exempt from donor’s tax? Under Republic Act No. 7166, as amended, any contribution in cash or in kind to any candidate or political party or coalition of parties for campaign purposes, duly reported to the Commission on Election shall not be subject to the payment of any gift tax.
If the person is not yet considered a candidate and he receives a donation from a corporation, would RA No. 7166 apply? If we were to follow the interpretation of the SC, it would appear that donations today may be subject to donor’s tax as the person is not yet considered a candidate; hence, the exemption would not apply.
If not exempt, the donation of a corporation under the Tax Code is subject to 30% donor’s tax. Further, the amount donated is not considered a deductible expense because it is not considered ordinary and necessary to the trade or business of a corporation.
So, if a corporation is planning to fund the infomercial of a political aspirant, it can donate before the campaign period starts without violating the CCP provision, but in effect, the total payout would actually be more than the cost of the infomercial because of the 30% donor’s tax hit.
Alternatively, a corporation may completely refrain from donating and instead allow the political aspirants’ qualifications, achievements, ability and sincerity speak for themselves. If the officers of the corporation really believe in the aspirant, they can support him through other means like campaigning for him for free.
After all, a true political campaign should be about the candidates’ qualifications and not about their catchy jingle. Is it really?
Realyn M. Postrado-dela Cruz is an assistant manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.
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