It is not every day that delinquents are given the chance to avail of tax amnesty. A review of our past tax amnesties, both legislated and administrative, show that delinquents are very seldom given breaks. Of the 10 tax amnesties passed during the Marcos administration, only one covered delinquents (i.e., Presidential Decree No. 68, issued in 1972). Of the three tax amnesties passed during the Corazon Aquino administration, none covered delinquents. However, there was Executive Order No. 44, which authorized the Bureau of Internal Revenue (BIR) to accept compromise payments on delinquent accounts.
The scarcity of opportunities given to delinquents to settle their outstanding tax liabilities, of course, is understandable, given that delinquents have usually committed some mistake (e.g., errors in handling their tax liabilities, mismanagement of tax audits conducted by the BIR, or just plain avoidance or evasion of taxes).
That our new amnesty law — Republic Act (RA) No. 11213 — provides an entire title on delinquencies is a promising development. Delinquents can finally be given a chance to come back into the fold — or can they really?
On March 12, the BIR held a public consultation on the proposed Tax Amnesty Revenue Regulations (RR). The proposed RR defined delinquent accounts as those pertaining to “a tax due from a taxpayer arising from the audit of the Bureau which had been issued Assessment Notices that have become final and executory.” To the surprise of many, the draft RR stated that excluded under the category of delinquent accounts are “unpaid tax liabilities arising from non-payment of self-declared or self-assessed tax (i.e., unpaid tax due per return filed).”
The dichotomization of delinquency — self-assessed tax vis-à-vis tax assessed through audit or enforcement — then allowing the latter to be covered by the amnesty, while disallowing the former, is rather perplexing. Delinquency has always been understood to refer to outstanding tax liabilities arising from either self-assessed taxes or a result of an audit or third party information through the issuance of an assessment notice that was not protested within the prescribed period. Every definition of delinquency in BIR rules and regulations would bear this out. When the BIR issued A Basic Guide on the Tax Amnesty Act of 2007, it sought to exclude from the coverage of the last general tax amnesty law: “Delinquent Accounts/Accounts Receivable considered assets of the BIR/Government, including self-assessed tax.” Really, liabilities arising from self-assessed taxes have always been embraced in the concept of delinquencies.
The dichotomization even becomes more baffling if we go back to the nature of a self-assessed tax. In Tupaz vs. Ulep, G.R. No. 127777, Oct. 1, 1999, the Supreme Court explained that a self-assessed tax is one where no further assessment by the government is required to create the tax liability. A self-assessed tax falls due without need of any prior assessment by the BIR, and non-payment of a self-assessed tax on the date prescribed by law results in penalties, even in the absence of any assessment by the BIR.
Indeed, one frequently cited distinction between a self-assessed tax and a tax assessed through audit or enforcement, is that the former, which is payable on the due date, becomes a “delinquency” if not paid, and can be collected immediately by means of administrative summary remedies. On the other hand, a “deficiency” tax resulting from an audit is effected through the issuance of an assessment notice payable within a certain period of time, which becomes a “delinquency” upon the taxpayer’s failure to pay within the due date stated in the demand notice. Hence, if we are to pursue the dichotomization, tax liabilities arising from self-assessed taxes are actually even “more delinquent.” To exclude them from the coverage of the tax amnesty on delinquencies is nothing less than a contradiction.
We understand that amnesties, to be effective, must be granted sparingly. But, then, the general tax amnesty was vetoed; surely, there is no need to further restrict the coverage of the latest tax amnesty law? At the end of the day, the law did not distinguish, so regulations should not distinguish. To remove from the coverage of RA No. 11213 delinquencies that arose from self-assessed taxes would severely limit the coverage of the law.
Maybe the BIR’s purpose in excluding those with unpaid self-assessed taxes from the coverage of the amnesty is because these are liabilities already known to, and admitted by, the taxpayer. Even so, is this not the essence of amnesty? To give a chance to errant taxpayers, and to give prodigal taxpayers the opportunity to comply with tax laws and enter the tax system with a clean slate.
While we are in the season of Lent, maybe it is a good reminder for us all that forgiving may really be hard, but not forgiving could hurt more.
Revenue Memorandum Circular (RMC) No. 19-2018 provided as exclusion from the coverage of the last general tax amnesty (RA No. 9480): Delinquent Accounts/Accounts Receivable considered as assets of the BIR/Government, including self-assessed tax. The RMC, however, was deemed by the Court of Tax Appeals in La Flor dela Isabela Inc., vs. CIR, CTA Case No. 7779, March 17, 2010, as altering the provisions of the law it seeks to implement.
Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.
Diana Elaine Bataller-Simbulan is a manager from the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.