Cebu biz leaders welcome measure imposing stiffer penalties on tax offenders; however, they worry that if it becomes law, it could be used to harass legitimate businesses

CEBU business leaders welcomed the legislation that imposes stiffer penalties on individuals or organizations that intentionally defraud the government of tax revenue under the tax code.

They agreed that tax evasion is a crime that needs to be addressed; however, they expressed concerns that unscrupulous individuals or groups may harass legitimate businesses if the legislation becomes a law.

According to Albay Rep. Joey Salceda, the author of the bill, tax evasion and tax racketeering activities involving the use of fake receipts and similar documents result in the loss of up to P100 billion in tax revenue for the government each year, the Philippine News Agency (PNA) reported. These activities must be criminalized and stopped as they constitute economic sabotage, as “taxes are the lifeblood of the state,” the lawmaker said.

With a vote of 276, the House of Representatives unanimously approved House Bill 8144, also known as “An Act Defining the Crime of Tax Racketeering,” on Monday, May 29, 2023, on its third and final reading.

Under the proposed law, tax racketeering is defined as a new criminal activity where any individual deliberately engages in a coordinated scheme or operation to evade taxes imposed under the National Internal Revenue Code of 1997 through the fraudulent use of receipts, returns and other records, amounting to a minimum of P10 million.

The legislation aims to address the loopholes in the tax code by imposing heavier penalties on offenders. House Speaker Martin Romualdez said in the PNA report that there are individuals who exploit loopholes in the law to avoid paying taxes to the government. Some people engaged in business reportedly misdeclare the prices of their goods and services so they can avoid paying higher taxes.

Philippine Retailers Association-Cebu chairman Robert Lim Go said tax racketeering is the worst kind of tax evasion as it teaches businesses “how to evade taxes for a fee.”

“They (unscrupulous) teach and solicit businesses how to evade taxes so they can compete with illegally performed businesses who underprice services or goods,” Go said.

He added that this distorted pricing of goods and services has affected countless shops throughout the city and the country.

Concerns

Kelie Ko, president of the Mandaue Chamber of Commerce and Industry, said tax evasion is always a criminal act, but the government must ensure that these new policies are not used to harass legitimate businesses and hinder the ease of doing business.

Charles Kenneth Co, president of the Cebu Chamber of Commerce and Industry, shared his sentiments, saying unscrupulous individuals may blackmail businesses into giving them bribes to avoid penalties and jail time.

Tax evasion

The proposed law also penalizes not only those who engage in tax racketeering but also those who act as accomplices and accessories.

The proposed penalties include 17 to 20 years of imprisonment for individuals convicted of the crime, 10 to 17 years of imprisonment for accomplices, and six to 10 years of imprisonment for accessories to the criminal activity.

The bill imposes fines of P5 million to P10 million and six to 10 years of imprisonment against individuals who commit offenses such as distributing, acquiring, using, or aiding in the use of unauthorized, fake, or falsified revenue official receipts, sales invoices, commercial invoices, Letters of Authority, certificates authorizing registration, tax credit certificates, tax debit memoranda, and other accountable forms, as punishable under Section 257 of the Tax Code.

These fines and penalties are significantly higher than the existing law’s fines of P50,000 to P100,000 and imprisonment of two to six years.

If the offender is a certified public accountant, his license to practice and certificate of registration are automatically revoked.

A public officer who abets or aids in the fraudulent activity will be charged as an accomplice and permanently disqualified from holding any public office.