Commission on Elections Chairman Jose Melo on Monday said there is a need for a law to tax political contributions.

“There should be a law taxing political contributions,” Melo said in reaction to the order issued by the Bureau of Internal Revenue imposing a five percent withholding tax on political contributions and campaign expenditures of candidates running in next year’s elections. BIR said the order issued last Friday was aimed at “maximizing tax collections arising from campaign expenditures and contributions.”

But Melo said Comelec needs to discuss the matter with the BIR and “there should also be a public discussion on that issue.”

Under the Omnibus Election Code, electoral contributions can be in the form of “gift, donation, subscription, loan, advance, or deposit of money or anything of value, or a contract, promise or agreement to contribute” for the purpose of influencing the results of the elections.

However, Republic Act 7166 states that any electoral contributions will not be subject to the donors’ tax or any form of tax.

Meanwhile, Malacañang denied it was behind the BIR plan to tax campaign contributions and expenses as a way to harass opposition candidates.

While admitting he has not read the BIR order, Deputy Presidential Spokesman Anthony Golez said it was unfair to put ill motives behind the plan aimed at generating P1.4 billion from candidates' transactions.

“I personally find it unfair because we haven’t seen the document yet,” Golez told reporters in the Palace.

At the same time, Cabinet Secretary Silvestre Bello III withheld any legal opinion if there is a need for a law imposing taxes on political contributions during elections.

In a related development, House Deputy Speaker for Mindanao Simeon Datumanong said he was not aware of any law allowing BIR to collect tax on political contributions and campaign expenditures.

“I do not know of a law that imposes withholding tax on campaign contribution,” Datumanong said.

On the other hand, an administration lawmaker welcomed the BIR directive, saying it would help determine where campaign funds of candidates are coming from.

“That’s fine with me,” said Cebu City Rep. Antonio Cuenco, adding that the move would help “minimize illegal sources of (campaign) funds.” (With reports from Genalyn Kabiling, and Edmer Panesa)