DOF estimates R668-B tax losses due to bank secrecy

Revenue leakage due to the restrictive banking laws in the Philippines may reach to about a third of the government's annual tax collection, this is aside from the country’s untapped benefits tied to the ASEAN capital markets, a ranking finance official said.

Finance Undersecretary and Chief Economist Gil S. Beltran said yesterday that the national government is unable to collect an estimated R668.34 billion in taxes and duties annually due to the bank secrecy law, or around 33.7 percent of its total yearly tax revenues.

For the Bureau of Internal Revenue (BIR), the government’s main tax agency, the estimated leakage is around 30 percent, or up to R470.16 billion based on its full-year tax collection in 2016 alone.

Beltran said that based on his own study, the biggest leakage is from the individual taxpayers, where only 15 percent of the total universe is properly collected by the BIR.

The Bureau of Customs, meanwhile, is suffering an estimated leakage of around 50 percent of its total tax take, equivalent to up to R198.18 billion annually.

“There will be some room to adjust if the bank secrecy law is lifted for tax purposes. Like for example, our mining tax collection is so low, and certainly we can collect more from this sector,” Beltran said in an interview in his office.

The DOF official also said the Philippines might not be able to maximize the benefits of ASEAN integration as Manila is barred from participating in the region’s integrated capital market due to country’s restrictive banking laws.

“We are not part of the ASEAN Trading Link that aims to lower barriers to entry for investors. We’re still in the middle ages,” Beltran said. So far, stock markets in Singapore, Malaysia and Thailand are the only bourses connected to the regional gateway for securities brokers.

Beltran added that the current banking laws are also preventing the Philippines from joining a global body for capital markets, including the International Organization of Securities Commissions (IOSCO).

“IOSCO will require us that the investor who will put his money here will be able to check whether the invested company is existing and has money,” Beltran said, but with bank secrecy law, “the investor cannot check whether that company [in the Philippines] is bogus or true.”

“If you’re going to put $1 billion in that company, you should know it’s not a bogus company, you should see the bank accounts and its assets,” he added.

Likewise, the Philippines is not allowed to