Taxwise Or Otherwise
By Mac Kerwin Visda
While guiding clients through their Bureau of Internal Revenue audits, I’ve been struck by an unsettling truth: congressional investigations into flood control corruption could erode taxpayers’ willingness to do their duty in funding vital public services. Allegations of collusion between contractors and officials to siphon off as much as 70% of project costs appears to turn every compliance initiative into an exercise in futility. When the very architecture designed to deter fraud instead abets it, even the most robust technical defenses can feel hollow.
While I wasn’t able to join the Trillion Peso March on Sept. 21, I was there in spirit. Driven by both technical curiosity and growing unease, I flipped through the audited financial statements of some of these government contractors that are publicly available on the Securities and Exchange Commission’s website (for a fee). Allegedly, up to 70% of a flood control project’s awarded cost is funneled into the pockets of various government officials and other co-conspirators. I wonder how they presented these government transactions in their financial reports.
For instance, if a contractor is awarded a P100-million contract, and it only uses 30% for the actual project, the net profit should theoretically approximate 70% unless the total revenue of P100 million was not recorded, or the 70% kickback was concealed or claimed as deductions by filing ghost expenses. As expected, one of these contractors’ net income accounts for only 5%-8% of service revenue. While such schemes can cover up bribed, understating the revenue would be more challenging due to publicly available information such as the DPWH’s awarded projects database and Sumbong sa Pangulo websites, which enable us to perform reasonableness checks on their total revenue.
It would appear that somewhere in the reports, large sums are buried in vague accounts labeled as professional fees or overhead, perhaps with invoices lacking real support, or sudden spikes in subcontractor payments that do not match work progress, and bookkeeping entries that erase audit trails.
All the recent revelations erode confidence in the system. To my mind, plunderers are also tax evaders. Recent Senate hearings also prompted questions on how these contractors managed to secure the tax clearances needed for government bidding. Most people assume that these clearances serve as proof that their books had been audited, and all taxes duly paid, fearing that the government might be barred from conducting further examinations should the need arise.
For clarity, a Tax Clearance for Bidding Purposes certifies only that a bidder:
• Has no unpaid annual registration fee;
• Has no open valid “stop-filer” cases;
• Is a regular user of the BIR’s Electronic Filing and Payment System from the time of enrollment up to the time of filing of the renewal of Tax Clearance for those with previously issued Tax Clearance for Bidding Purposes.
• Is not tagged as a “Cannot Be Located (CBL)” taxpayer;
• Has no Accounts Receivable/Delinquent Accounts; and
• Has no pending criminal information filed in any court of competent jurisdiction arising from any tax or tax-related cases.
In other words, taxpayers can still be investigated even after securing a tax clearance. While our tax laws generally grant the BIR a period of three years from a return’s due date to assess liability, this period can be extended to ten years in case of falsity or fraud, with the 10-year period counted from the date of discovery. The recent admissions from the Senate about systematic under-declaration satisfy the prima facie evidence test: a substantial understatement of taxable sales, receipts, or income, or a substantial overstatement of deductions. This constitutes prima facie evidence of a false or fraudulent return.
The BIR’s aggressive Run After Fake Transactions (RAFT) campaign, launched in 2022, deserves commendation for cracking down on ghost-receipt schemes that have long eroded the country’s tax base. Through coordinated audits, criminal complaints, and collaboration with the Department of Justice, the BIR has successfully collected over P4.3 billion — and expects that figure to grow to at least P8 billion once all current assessments conclude. This decisive action sends a clear message: tax evasion will not be tolerated, and our public revenue merits vigilant guardianship. As we applaud these successes, we anticipate that the next RAFT will scrutinize these government contractors behind ghost and substandard projects, ensuring that public funds are safeguarded with equal rigor, if not more — so every alleged tax evader faces justice and is held accountable.
Fortunately, the previous President vetoed the general tax amnesty provisions of Republic Act No. 11213, recognizing that without lifting bank secrecy, incorporating exchange-of-information clauses, and embedding robust safeguards against untruthful asset declarations, such an amnesty would be vulnerable to exploitation by potential tax avoiders. His veto message underscored that a tax amnesty’s success hinges on these protective measures to validate applications and deter evasion. In response, Senate Bill No. 60 now proposes a new general tax amnesty that enshrines these crucial safeguards (e.g., one-year window to inquire about bank deposits, and use exchange of information). I am hopeful that once implemented, the program achieves its revenue objectives and does not become a vehicle for a select few to escape their fair share of taxes.
Whether we are public officials or private citizens, we owe it to our nation to make corruption not just unlawful, but culturally repulsive and intolerable. It must be seen as grotesque, treasonous, and never normal. Let us keep marching, keep speaking, and keep holding the line until justice becomes no longer the exception, but the rule. Let the Trillion Peso March rise beyond a moment of outrage and become a relentless movement that demands real reform and refuses to be silenced. The voices calling for change must not fade. They must continue to resonate until the systems that enable corruption are dismantled, where trust and accountability become the standard, not the surprise.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only and should not be used as a substitute for specific advice.
Mac Kerwin Visda is a senior manager at the Tax Services department of Isla Lipana & Co., the Philippine member firm of the PwC network.
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