The Bureau of Internal Revenue (BIR) said on Wednesday prospective candidates in next year's national and local elections will not spend a single cent in the collection of the 5 percent withholding tax on campaign expenditures.

"The tax will be exclusively shouldered by individuals and companies doing business with candidates and political parties," Acting BIR Commissioner Joel Tan-Torres stressed during a meeting with politicians and business executives at the BIR regional office in Manila.

Manila Revenue Regional Director Arnel Guballa and his district officers arranged the conference to clarify issues on the controversial revenue order imposing the 5 percent withholding tax on political campaign expenses.

He said the tax is collected through the expanded withholding tax system wherein candidates as withholding agents are required to deduct a portion of their payments to suppliers of goods and services to their campaigns.

The BIR chief explained that the expanded withholding tax system has been in place for over 30 years as provided for under Section 57 of the tax code and accounts for about 40 percent of the annual total collection of the bureau.

The revenue official said the same tax is also imposed to other consumers or buyers of a wide range of goods and services.

He said what is new under the recent Revenue Memorandum Order No. 8-2009 is to make these candidates and political parties withholding agents of the BIR.

As withholding agents, they are required to pay their supplier of goods and services 95 percent of the contracted price and remit the balance of 5 percent to the BIR.

Tan-Torres explained that if the cost of the goods or service is P100,000, the P5,000 should be withheld and remitted to the BIR.

He said "there is no additional amount the candidates or political parties shall pay their suppliers, thus there is no reason that the campaign expenditures will go up as the result of the 5 percent withholding tax."

BIR insiders said, however, they will have difficulty in collecting the tax as contributions are mostly done "under-the-table."

They also said they expect from P30 billion to P50 billion drop in collection this year as some big corporations and rich individuals divert portions of their tax payments to the campaign coffers of their favorite candidates, a malpractice which they have been doing for years.