For Christians, Easter is the culmination of the Lenten Season when the faithful are called to repent for sins committed.
Everyone needs a second chance, even taxpayers who are remiss in their legal duties. In reparation, erring taxpayers are sometimes given an opportunity to abide by the law and raise public funds for the State through a tax amnesty program.
The country’s most recent experience with tax amnesty was Republic Act (RA) No. 9480, which was passed in 2007, authorizing an amnesty on all national internal revenue taxes for taxable year 2005 and prior years. The tax amnesty was not extended, however, to the following cases: 1. withholding agents, with respect to their withholding tax liabilities; 2. pending cases under the jurisdiction of the Presidential Commission on Good Government; 3. cases involving unlawfully acquired wealth under the Anti-Graft and Corrupt Practices Act; 4. cases involving violations of the Anti-Money Laundering Act; 5. pending criminal cases for tax evasion; and 6. tax cases subject to final and executory judgment by the courts.
The amount to be paid for the tax amnesty was the higher amount between: (a) a flat rate of 5% of the taxpayer’s net worth based on the submitted Statement of Assets and Liabilities and Net Worth (SALN); and (b) a fixed amount ranging from P50,000 to P500,000, depending on the taxpayer type and amount of subscribed capital.
The results of the implementation of the 2007 amnesty law were encouraging. In its 2008 annual report, the BIR noted that P5.902 billion was collected from 20,629 taxpayers who availed of the program which was implemented from July 15, 2007 to May 30, 2008.
Ten years have passed since the last tax amnesty because the law placed a moratorium on further grants of tax amnesty. The moratorium was intended to impress upon taxpayers that amnesties do not come around often; otherwise, there will be a tendency to just wait for the next amnesty rather than fulfill their duty of paying the correct taxes. This is counterproductive and will not produce the desired effect of improving tax compliance. However, the moratorium was not intended to last forever, and should not prevent the passage of another tax amnesty.
Recently, the first package of the government’s comprehensive tax reform program (i.e., Tax Reform for Acceleration and Inclusion Act or TRAIN) was passed. The TRAIN essentially granted a reduction of personal income, estate, and donor’s tax rates. However, such reductions are only part of the TRAIN’s expressed intention, the other being inclusion, that is, encouraging more citizens to become part of the taxpayer base. Accordingly, the passage of an amnesty law is not just a coincidental, but rather, a vital part of the government’s ongoing tax reform initiative.
In February, House Bill 7105 was filed, granting amnesty on all unpaid revenue taxes imposed by the national government for taxable year 2017 and prior years. Like its predecessor, the bill proposes that the amnesty tax be computed based on the taxpayer’s net worth as shown in their SALN or their respective taxpayer type and amount of subscribed capital.
In the tax amnesty’s latest incarnation, the amount of amnesty tax shall either be a flat rate of 8% of the net worth or a fixed amount ranging from P10,000 to P10,000,000, for individual or corporate taxpayers. A lower rate of 4% shall be used to determine the amnesty tax of nonstock corporations and government-owned and controlled corporations. In addition, should there be existing tax assessments issued against a taxpayer, his amnesty tax shall be 50% of the basic tax assessed.
Though RA 9480 and HB 7105 have similar features and objectives, there is always room for improvement. With the benefit of retrospection, we may ask: what improvements can be made to enhance the law and its implementation?
Several factors may be considered. First, even with the presumption of correctness of the SALN, the BIR should be able to determine whether such a document submitted by the taxpayer reflects his actual financial position. Anticipating this, HB 7105 proposes to allow the BIR Commissioner to inquire into and receive information on bank accounts and other related data held by financial institutions. It also proposes to authorize the Commissioner to obtain on a regular basis any relevant information about a taxpayer whose internal revenue tax liability is subject to audit or investigation for purposes of ascertaining the correctness of any return or evaluating tax compliance, among others.
Next, the implementing rules to be issued must consider the length of time for the implementation of the program. As mentioned, the previous amnesty ran for about 10 months, but this may have been too short considering that the implementing rules took time to formulate and issue. Thus, in order to allow taxpayers more time to consider this option and to participate, the period of availment may be made longer and counted from the date of issuance of the implementing rules and regulations.
Also, it may be helpful for the BIR to tap media outlets to advertise the amnesty program in the same manner it promoted the proper payment of taxes by releasing the “Register, File, Pay (Know Your Taxes)” ad not too long ago. Creating awareness increases the pool of possible taxpayers who will avail of the amnesty grant.
Last, the taxing authority must be transparent in reporting the accomplishments of the program to the public. Based on Section 290 of the Tax Code, a Congressional Oversight Committee shall review the collection performance and the implementation of the BIR’s programs. Congress may also exercise its oversight function enshrined in Article 6 Section 22 of the Constitution to invite the Secretary of Finance to report on the status of the implementation of the tax amnesty program.
The success of any tax amnesty program requires the participation of all stakeholders. While the legislature may extend pardons to erring taxpayers, the Executive branch is responsible for implementing follow-through measures. On their part, the taxpayers should be willing to come forward and use this chance to wipe the slate clean, and in return, become more compliant in the future. A wider tax base would imply that a greater number will share in the burden of sustaining the government, easing the burden on the part of each compliant taxpayer.
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.
Vanesa Joyce C. Banta is a lawyer and Senior Consultant at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.
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