An amnesty for the taxpayer and taxman

his Theory of Moral Sentiments, the great economic philosopher Adam Smith wrote, “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice.”

Does peace reign over the Philippines? Is the administration of justice tolerable? Those are for another column. But determining whether paying taxes in our country is easy? It’s anything but.

Our government may be troubled by low collections, tax evasion, and general non-compliance — prompting such crackdowns as the Run After Tax Evaders (RATE) program of Bureau of Internal Revenue (BIR). But the blame does not fall only on those who renege on their obligations, especially since many are encumbered by a convoluted, inefficient, and corruption-prone system.

For instance, PwC’s 2018 Paying Taxes report revealed that in the Philippines, it takes 182 hours and up to 20 payments for a taxpayer to comply with their obligations. In contrast, it only takes 105 hours and 11 payments in Australia, 72 hours and 3 payments in Hong Kong, and 64 hours and 5 payments in Singapore.

In theory, bureaucracies exist for noble purposes. In practice, however, they’ve been used for ignoble ends. And the continuous exposure to a non-responsive — and at times, predatory — system has eaten away at the trust and, more importantly, the hope that people have in their government and its policies.

A 2004 seven-country survey by the Center for Research in Economics, Management, and the Arts (CREMA) in Switzerland showed that the Philippines has very low “tax morale” — or the intrinsic motivation one has to pay and comply with their taxes. When asked if they agreed that all tax evasion is never justifiable, 96 percent of respondents from Bangladesh, 80 percent from Japan, 79 percent from China, 77 percent from India, 71 percent from South Korea, and 63 percent from Taiwan said yes. In the Philippines, however, less than 40 percent (38.2 percent) — or 2 out of 5 — agreed with the statement.

Such “tax morale” problem is exacerbated by the lack of manpower and institutional capacity in our revenue agencies like the Bureau of Internal Revenue. Note that since 2014, up to 11,000 plantilla positions in the BIR have yet to be filled. This explains why of the hundreds of tax evasion cases handled by the BIR since 2010, only 6 have actually resulted in conviction.

All these considerations prompted us to sponsor in the Senate earlier this week Senate Bill 2059, calling for a general tax amnesty. We hope that not only will such amnesty give taxpayers a chance to adjust to the new rules that were put in place last year, but also to lighten the load of an overstretched BIR so that they can focus on their main mandate of collection.

The proposal shall cover tax obligations for year 2017 and prior in three major areas — Estate Taxes, General Taxes, and Delinquent Accounts.

For a reprieve on their estate tax obligations, taxpayers will be asked to pay 6 percent — the new rate under the new rules — on the decedent’s total net estate.

They will also be allowed to pay at a 5-percent rate for all national internal revenue tax obligations, including VAT and excise taxes collected by the Bureau of Customs (BOC). Early availers will also be given discounts.

Those with delinquent accounts will also be given amnesty. They will be asked to only pay 40 to 60 percent of the basic tax due, given certain conditions.

To complement the privileges granted to taxpayers, the Department of Finance (DOF) and other revenue agencies will be further empowered to aggressively go after those who still refuse to comply. An Information Management System will be established so that the agencies involved can have better use of the relevant information declared or obtained. There will also be the automatic exchange of information (AEOI) between the BIR and the respective tax authorities of up to 43 partner-countries.

The writer Victor Hugo once wrote, “Amnesty is as good for those who give it as for those who receive it. [Amnesty] has the admirable quality of bestowing mercy on both sides.” Hopefully, all sides will be given a fresh start.

sensonnyangara@yahoo. com| Facebook, Twitter & Instagram: @sonnyangara

Senator Sonny Angara was elected in 2013, and now chairs the Senate committees on local government, and ways and means.