Throw the tax net to catch all

Bureau of Internal Revenue (BIR) commissioner Caesar Dulay has disclosed last week about ongoing talks with world boxing champion Senator Manny Pacquiao for a possible compromise settlement involving his pending P3.2-billion tax evasion case. Pacquiao subsequently confirmed his lawyers have indeed initiated talks with the BIR to settle amicably his alleged tax evasion case pending before the Court of Tax Appeals (CTA).

Ex-BIR chief Kim Henares filed the tax evasion case against the boxing champion-turned-senator for his alleged failure to pay P2.2 billion in taxes from his boxing matches held in the United States from 2008 to 2009. Pacquiao’s lawyers have argued the Kim-led BIR should not run after him as he had already paid $8.35 million in taxes to the US Internal Revenue Service in 2008 and 2009. He invoked the Philippine-US treaty against double taxation.

While under protest, Pacquiao’ tax woes ballooned to over P3.2 billion through the years due to surcharges and interest. Under the Internal Revenue Code, Pacquiao was slapped 50 percent surcharge and 20 percent annual interest on tax due.

Incidentally, Pacquiao will be likewise covered by the Philippines-Australia Tax Treaty in his scheduled prizefight with Australian boxer Jeff Horn. Pacquiao will defend his WBO welterweight championship against the 29-year-old Horn in Brisbane on July 2.

While agreeing to negotiate for compromise settlement with Pacquiao, Dulay indicated the BIR is taking a much tougher stand against local tobacco company Mighty Corp. which has been found engaged in alleged use of “fake” BIR stamp tax on their cigarette products. This came after a series of raids done by the Bureau of Customs (BOC) on Mighty Corp. warehouses in Bulacan and Pampanga netted cigarette products reportedly bearing “fake” BIR tax stamps.

The BIR chief was quoted having announced that the factories of Mighty Corp. may be closed down next month due to its alleged use of “fake” cigarette tax stamps to evade the P9.6-billion tax payment. This is because, Dulay cited, BOC ordered the cancellation of the manufacturer’s license to import, leaving the tobacco company with limited supply of raw materials for cigarette production.

The BIR chief’s could-not-care-less stand if a company stops operations was off-the-cuff. But for sure, President Duterte would not wish the closure of a business that may result to hundreds if not thousands of Filipinos to become jobless and tobacco planters to lose income.?They too, are income tax filers of the BIR. And what about the “sin” tax collections from this source of government revenues, portions of which are earmarked by law to public health services?

Dulay’s statements came after President Rodrigo Duterte publicly declared he prefers a reasonable compromise for tax deficiencies rather than having the government engaged in protracted tax collection cases. Once a state prosecutor himself in Davao City, President Duterte pointed out it would take years before the courts decide on the cases filed against tax evaders. “The law allows a compromise and I will allow compromise rather than the other party filing a case,” the President explained during a convention of the Federation of Filipino-Chinese Chamber of Commerce and Industry last month in Pasay.

At the outset, President Duterte brushed aside insinuations of his going soft against the tobacco company was because its president, Alexander Wongchuking, happens to be a fellow “mistah,” adopted like him by the Philippine Military Academy (PMA) Class 1967 when he was still Davao City Mayor. He revealed having rebuffed earlier the emissary of his “mistah” who brought him a box that turned out to contain cash money in an obvious bribery attempt.

Fortunately, the immediate supervisor of Dulay and BOC chief Nicanor Faeldon, Finance Sec. Carlos “Sonny” Dominguez, has eyes on a bigger picture. The BIR along with the Bureau of Customs are attached agencies under the Department of Finance (DoF) headed by Dominguez.

Dominguez was quoted saying the Duterte administration will strongly push the 17th Congress to approve first the pending bills on comprehensive tax reform package before granting any tax amnesty. Among the priority bills under this tax reform package, Dominguez cited, is the proposed amendment to relax the Philippine Bank Secrecy Law, specifically for tax evasion and fraud cases. The Philippines is one of the three remaining countries (the two others are Switzerland and Lebanon) where tax administrators cannot access bank transactions due to a very restrictive Bank Secrecy Law.

Other certified priority bills under the tax reform package include the DoF proposal to lower the personal income taxes; broaden the value added tax (VAT) by cutting down on exemptions; increase excise taxes on petroleum and automobiles as well as reduce the estate and donor’s tax rates.

All of which are controversial because each bill would either mean huge revenue losses for the government or impose more taxes. During the May 2016 presidential debates, the former Davao City mayor who was then the front-running candidate, frowned against imposition of new taxes.

Admitting he is not good at Economics as a subject, the former mayor-turned-President promised he would leave to his much wiser advisers and economic experts to determine the mix of economic and fiscal policies. His only guidance to his team of Cabinet and economic managers is to adopt policies that would benefit the greater number of Filipino people and the country as a whole.

Earlier, Dominguez reportedly declared the government would “most likely come up with a tax amnesty program” to be designed “very similarly” to the Indonesian model. According to him, the amnesty program would be applied to taxpayers with deficiencies in payments of property taxes, estate taxes, regular taxes such as income taxes and VAT as well as amnesty on pending cases in courts.

For this purpose, a tax amnesty program would be legislated “to clear up all tax cases” of the BIR.

Will these tax reforms bills be finally passed into law this time with Dominguez at the helm along with President Duterte’s chief allies from his administration PDP-Laban-controlled 17th Congress, namely, Senate president Aquilino “Koko” Pimentel III and Speaker Pantaleon Alvarez?

While waiting action by Congress, President Duterte repeatedly warns to cast a finer tax net that will catch all evaders, especially the big ones that got away in the past.