THE DEPARTMENT of Finance (DoF) said it will find other means to offset the removal of provisions in the tax amnesty bill that would have authorized it to look into bank accounts and exchange data with foreign regulators.
The House ways and means committee approved the tax amnesty bill on Monday, but removed provisions on the automatic exchange of information and the easing of the bank secrecy law due to constitutional constraints. The Senate did the same in its counterpart bill approved on second reading on Tuesday.
The legislation as drafted was found to have violated Section 26 of the 1987 Constitution, which states: ”Every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof.”
The House and Senate bills deal with tax amnesty. The DoF’s planned administrative measures to effect the exchange of information and penetrate bank secrecy are effectively amendments to the 1997 tax code.
“That’s double subject matter. That’s not allowed,” House ways and means committee chair Estrellita B. Suansing of Nueva Ecija’s first district said in a phone interview.
She said that her committee will pursue the measures “if they (Department of Finance) will draft a bill. Rep. [Makmod D.] Mending [Jr.] is willing to sponsor the bill as he said in the hearing.”
Finance Secretary Carlos G. Dominguez III said in a mobile phone message: “Yes, we will push to reinstate.”
“We trust that the Legislature will recognize the necessity of strengthening the law to enhance the Administration’s ability to enforce the tax laws which were passed by them in the first place,” he added.
Mr. Dominguez said that both provisions are expected to help generate P15 billion in additional revenue.
The tax amnesty bill seeks to put non-compliant individuals and businesses on the government’s radar by offering them an amnesty on unpaid estate taxes, all other internal revenue taxes, and on delinquencies. A participating taxpayer will pay a percentage of total assets as of December 2017 — depending on the type of amnesty — in exchange for immunity from civil, criminal, and administrative penalties concerning tax payments.
The DoF expects the tax amnesty legislation to yield up to P26 billion in additional revenue, but said the main objective is to grow the tax base.
Tax experts however said that the exchange of information (EOI) and bank secrecy measures are necessary to attain the tax amnesty’s goal of curbing tax evasion.
Isla Lipana & Co. Tax Managing Partner Maria Lourdes P. Lim said via text: “While we support the intention of government to cooperate in the global initiative on EOI and compliance with international commitments, we believe there is legal infirmity as such inclusion in the tax amnesty bill would violate the Constitutional prohibition on riders.”
“If we are really serious about these, then they may include in TRABAHO (Tax Reform for Attracting Better and High-quality Opportunities) or other packages amending the Tax Code or maybe even sponsor a separate bill specifically on these items and have the same certified by the President as an urgent measure,” added Ms. Lim.
The automatic exchange of information and easing of bank secrecy rules were originally part of the DoF’s first tax reform program that amends the tax code — Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) law — but these components were removed during bicameral committee deliberations.
The principal, and head of P&A Grant Thornton’s Tax Advisory & Compliance business Eleanor L. Roque said in a separate mobile phone message: “Those two things are definitely important and should be pursued.”
“The repeal of the bank secrecy law has long been pushed by some sectors as an important measure to improve tax collections and curb corruption. It is time for Congress to tackle it head on and not as a rider to a tax amnesty law,” she added. — Elijah Joseph C. Tubayan