Tax amnesty cannot be one-sided
PRESIDENT Rodrigo Duterte has partially vetoed the tax amnesty law passed by the 17th Congress, particularly the provisions calling for a general tax amnesty of all unsettled tax obligations.
The veto was made upon the recommendation of the Department of Finance ( DoF) and announced by Finance Secretary Carlos Dominguez 3rd to reporters over the weekend. This is the second veto of a tax law, after the DoF successfully blotted out tax perks for expatriates and their Filipino counterparts working in regional operating headquarters from the Tax Reform for Acceleration and Inclusion Law in 2017.
On one hand, the partial veto is a major letdown as many taxpayers, individuals and businesses alike, had been pining for a general amnesty covering 2017 and prior years, so they could begin with a fresh slate and remove any threat of a tax evasion case.
On the other hand, policymakers must weigh the pros and cons. The DoF may have, in fact, prevented indirect revenue losses from tax administration of P53 billion this year alone if the general tax amnesty provision, as passed by Congress, was not vetoed by the Chief Executive. Moreover, the tax amnesty campaign, last implemented by the DoF and the Bureau of Internal Revenue ( BIR) in 2005, would have raised only P6.8 billon, instead of P13.6 billion with certain “safeguards.”
These safeguards include lifting bank secrecy provisions, allowing the government access to taxpayers’ bank accounts. The DoF wants to “break the wall of bank secrecy” to prevent taxpayers from abusing the amnesty program by hiding their liquid assets.
The proposal is worth considering. Even with a tax amnesty in place, taxpayers still need to get a sense that the DoF and BIR mean serious business. It cannot be a general tax amnesty as usual; the government should also get something out of it, e. g., more information from taxpayers that the BIR could use to establish benchmarks.
Otherwise, a moral hazard problem could set in; taxpayers would remain complacent and wait for the next tax amnesty to clear their tax problems.
The good news is that there will still be an amnesty on tax delinquencies — those with final assessments or with criminal cases in court. The rates are 50 percent and 80 percent, respectively, on the basic tax.
Also, the estate tax amnesty was kept intact. This will free up numerous estates that have been unsettled for generations because of mounting tax liabilities, and allow heirs to develop these properties for productive use and even help the economy.
We agree with Secretary Dominguez that the amnesty rate of 6 percent of the estate is generous. Thus, the DoF was also justified in opposing a one- time estate settlement given this low amnesty rate. Indeed, it would be unfair to others who had settled their estates in a timely manner and in each step of the way, i. e., every instance of death of an estate owner.
Taxpayers should not be allowed to expect tax amnesties to be periodic, one-sided exercises. The message should be clear: The taxman can be generous and merciful, but he cannot simply surrender his obligation to collect taxes, the lifeblood of the government.