'Panama Papers' could prompt tax probe - BIR

MANILA, Philippines - Once completely released, the so-called "Panama Papers" could serve as springboard for the Bureau of Internal Revenue (BIR) to pursue a tax investigation, the agency's chief said on Tuesday.

"I have not read the Panama Papers yet, but if ever, it is a guide for the BIR where to look to determine if there is any tax liability or not," commissioner Kim Henares told The STAR.

While there have been no Filipinos named yet, contrary to earlier reports, the International Consortium of Investigative Journalists (ICIJ) is expected to release details in the coming days over which personalities and institutions are dodging taxes by moving their wealth to tax havens.

In 2013, ICIJ released a separate investigation on offshore holdings, where Ilocos Norte Gov. Imee Marcos, her three sons and Sen. Jose Victor Ejercito were tagged.

Henares said the Panama Papers provide another reason why the Philippines should revisit its laws on bank secrecy and anti-money laundering.

Existing tax breaks that are "available to the rich to avoid payment of taxes" should also be amended.

"We should lift the bank secrecy law for tax purposes to make sure there is a way for the BIR to monitor people to comply with their tax liabilities, make tax evasion a predicate crime for money laundering and rationalize fiscal incentives," she said.

The global report, which has pushed governments from Europe to Asia to conduct investigations, came as the Philippines scramble to find answers over its own $81-million money laundering case.

Senate hearings on the stolen funds from the Bangladesh Bank, the South Asian nation's central bank, resumed on Tuesday. The Anti-Money Laundering Council is yet to complete its own probe.

Nestor Espenilla Jr., deputy governor at the Bangko Sentral ng Pilipinas, said banks are required to have "enhanced" know-your-customer regulations when dealing with shell companies.

These entities, according to the ICIJ, acted as "shadow companies" for personalities such as Russian President Vladimir Putin and Chinese Premier Xi Jinping to hide their wealth from tax authorities.

"This means more than the normal KYC for both the entity and the beneficial owner, upon account opening," Espenilla said in a separate text message.

"After account opening, transactions of high-risk customers such as these entities are subject to constant monitoring by banks for unusual activities," he added.

On government side, Henares reiterated the importance of exchange of information among different jurisdictions which naturally fear getting blacklisted and thus will cooperate.

Currently, none of the 132 members of the Global Forum on Transparency and Exchange of Information are on the blacklist, although countries are on different stages on implementing automatic information exchange.

The Philippines, through Republic Act 10021 enacted in 2010, allows tax information exchange, but only with prior request from another country.

Henares sits as vice-chair of the multilateral group drafting the treaty on Base Erosion and Profit Sharing (BEPS), which would give governments more power to tax cross-border and online transactions.

The Tax Management Association of the Philippines (TMAP), the industry group of tax practitioners, said earlier a BEPS treaty could help on tracking down wealth on tax havens once implemented.

Lower income taxes?

TMAP president Benedict Tugonon also took the opportunity to call for lower income taxes supposedly to deter people and companies from hiding their earnings abroad.

"Lowering personal income tax rates in the Philippines may encourage Filipinos to voluntarily report their foreign income...or transfer their legitimate investments abroad to the Philippines," he said in a text message last Monday.

But Henares rejected this. "I think if it is just lowering tax rates, mathematically, it will result in lower tax collection," she said.

"I believe the basic complaint of people is that the compensation income earners are paying more than the businessmen and the rich. Therefore, lowering tax rate will not answer this," she added.