Tax laws toothless against wealth transfer to avoid taxes

MANILA, Philippines – Amid a news report that made a massive leak of documents showing how institutions and personalities evade taxes, local authorities and industry players admitted both Philippine and global laws are "toothless" to fight such phenomenon.

"In our case, we do not have information on how much is being lost because of that (wealth movement)," Bureau of Internal Revenue (BIR) deputy commissioner Estela Sales said in a phone interview on Monday.

Terence Conrad Bello, immediate past president of Tax Management Association of the Philippines, meanwhile said there was essentially "nothing new" on the so-called "Panama Papers" released by the International Consortium of Investigative Journalists.

"It's nothing new. Tax practitioners already know that this is happening," Bello said in a separate phone interview.

"However right now, we are toothless to combat that," he added.

More than 500 Filipinos are included on what is considered to be the biggest leak of tax records comprising 11.5 million documents that showed how personalities -- from celebrities to political figures -- move their wealth to avoid taxes.

Sales said efforts are being undertaken to plug loopholes in the tax system and give the government what it is due.

"Our concern is taxes... To that extent, exchange of information will be able to assist us," she said.

"Foreign governments can give us information and from there we can act," she added.

But Bello disagreed, saying most jurisdictions considered as tax havens are "blacklisted" countries where exchange of information does not apply.

"Most of these jurisdictions where proceeds from these criminal activities go are tax havens where we do not have tax treaties with to confirm what is really happening," he explained.

Developed countries are leading negotiations on a multilateral treaty on Base Erosion and Profit Sharing (BEPS), which aims to arm states to tax cross-border wealth and business-to-consumer transactions.

It also covers the digital economy or taxes that could be generated from online purchases.

BIR commissioner Kim Henares serves as vice-chair of the group drafting the treaty. She could not be reached for comment.

According to the Organization for Economic Cooperation and Development, governments are losing between $120 and $240 billion in revenues to BEPS every year.

"BEPS is still under discussion. It could probably help, but not immediately," Bello said.

"What we could do is strengthen our banking laws or it even boils down to strengthening our anti-money laundering laws," he added.

The Philippines is currently investigating an $81-million money laundering case involving stolen funds from a New York Federal Reserve account of Bangladesh Bank, the South Asian nation's central bank.