A second take on forgiveness: General Tax Amnesty 2.0

On July 28, the 20th Congress officially convened for its first regular session, marking the final half of the current administration’s term. Interestingly, even prior to this formal opening of session, we saw several Senators who proactively introduced and filed priority bills.

Among the notable bills filed was the formal introduction of a new General Tax Amnesty (GTA) Act through Senate Bill No. 60. At first glance, the current version of the draft bill generally adopted the GTA mechanism under Republic Act No. 11213 or the 2018 Tax Amnesty Act, which was vetoed.

Former President Rodrigo Duterte vetoed the GTA portion of the 2018 Tax Amnesty Act due to the absence of provisions lifting bank secrecy rules and the failure to include Exchange of Information (EoI) clauses, both of which are essential for the Bureau of Internal Revenue (BIR) to validate tax amnesty applications effectively. Furthermore, the 2018 GTA was deemed inadequate because it lacked sufficient safeguards against untruthful declaration of assets and net worth. In his veto message, Mr. Duterte explained that the objective of a tax amnesty law cannot be achieved if there are no necessary measures in place to prevent its misuse for tax evasion purposes.

In response to the previous administration’s veto message, Senate Bill No. 60 proposes several key provisions to enhance the GTA framework:

1. Upon the filing of a sworn GTA return, the Commissioner of Internal Revenue will have a one-year window to inquire into and receive information on the taxpayer’s bank deposits and other related data held by local and foreign financial institutions. The Commissioner is also authorized to conduct an EoI during this period with the applicable foreign tax authority under an existing international agreement, convention, or treaty that the Philippines is a signatory of.

2. The Statement of Total Assets (STA) and the Statement of Assets, Liabilities, and Net Worth (SALN) submitted during the GTA application are initially presumed to be true and correct. However, if the Commissioner determines within a year from the filing of the GTA return that these statements are understated by at least 30%, the associated immunities and privileges granted after payment of the amnesty tax will be revoked.

3. All tax returns and statements required for the GTA must contain a written affirmation that these are submitted under the penalties of perjury, ensuring legal accountability.

4. Information and data concerning the STA and SALN (including all supporting documents submitted during the GTA application) are confidential and cannot be used in any investigation or prosecution before any judicial, quasi-judicial, or administrative body.

5. The BIR, in cooperation with other relevant government agencies, will establish an “Information Management Program” to effectively utilize data obtained from the GTA Returns, STA, and SALN. These documents will be processed separately from other BIR records to enhance data management.

6. Penalties will be imposed for unlawful divulgence of information on the GTA return and related documents, thereby maintaining taxpayer confidentiality.

In its present form, Senate Bill No. 60 presents a more balanced tax amnesty mechanism compared to its 2018 predecessor. By clearly defining the period of the BIR’s access to bank information and introducing measurable safeguards against under-declaration, along with the provisions on data confidentiality and penalties for unauthorized disclosure, the bill directly addresses the critical reasons for the previous administration’s veto.

However, while this new iteration of the GTA bill aims to overcome the deficiencies of the 2018 version, it remains to be seen whether this new bill will gain traction and become law within the remaining three years of the current administration. As the bill is still in its preliminary stages, it will have to endure the rigorous legislative process and approval of both houses of Congress before it reaches the President’s desk.

What is clear, however, is that tax amnesty programs have historically been proven to generate significant immediate revenue, which can be used to fund programs to address the pressing social and economic issues of the country — as demonstrated in the collection of P7.2 billion during the 2006 Tax Amnesty Program. More importantly, these programs also offer taxpayers an opportunity to rectify past mistakes without penalties. When implemented with strong safeguards, tax amnesty programs are not merely about revenue recovery, they also play a pivotal role in rebuilding trust and fostering cooperation between the taxpayers and the government.

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.

Bon Yannicka M. Chua is a manager at the Tax Services department of Isla Lipana & Co., the Philippine member firm of the PwC network.

+63 (2) 8845-2728

bon.yannicka.x.chua@pwc.com