Tax amnesty: Another political gimmick?

Malacañang is certifying as urgent a bill that would provide amnesty to tax cheats, and hopefully raise a one-time revenue estimated at P9.4 billion. This bill is expected to pass with less opposition, unlike two other bills that are currently pending in Congress even though both combined are estimated to yield about P20 billion on the first year and about P5 billion annually.

(The proposed adjustment in excise taxes on sin products should give the government a one-time windfall of P14 billion plus some incremental revenues - albeit smaller - yearly. On the other hand, the rationalization of documentary stamp taxes is seen to increase collections by P5 billion annually.)

I guess these are just not normal times, especially since we have an incumbent president seeking a mandate from the people she has served for the past three years after toppling a duly elected one. With the prospect of running against another very popular opponent, she needs as much support as she can get, particularly from the Filipino-Chinese business community.

This administration is doing everything it can, even committing kidnappers to the controversial death sentence, to woo what is emerging as an important voting and extremely wealthy electoral block (and source of campaign funds), the Filipino-Chinese business community.

The exchange deal

With the Federation of Filipino-Chinese Chambers of Commerce and Industry amenable to the passage of this bill, thousands of delinquent taxpayers expect to be given a tax reprieve as long as they file their statement of assets, liabilities and net worth ending Dec. 31, 2001.

With the Bureau of Internal Revenue tightening its collection efforts using better tax mapping and monitoring measures, the bill is expected to ferret out not only those who had misdeclared their income statements, but also those who have evaded – but are now being tracked – by the BIR for not paying even a centavo in taxes.

Applicants to the tax amnesty will be immune from all civil, criminal and administrative charges. They are also exempted from paying penalties. Which is why Malacañang is pushing Congress to pass the law before elections, by February if possible.

Extending the tax net

Based on the bill filed in the House, all taxpayers availing of the amnesty will be required to file a statement of assets, liabilities, and net worth (SALN). According to the Department of Finance (DOF), the SALN will be used by the government to expand its database and better monitor future tax payments.

The House bill calls for an amnesty rate of three percent of net worth for persons and corporations, and two percent only for individual non-residents. The DOF, however, wants to impose an amnesty rate of 10 percent based on the increase in net worth for those amending their tax declarations and three percent based on net worth for those filing their SALN for the first time.

The DOF also wants Congress to provide safeguards in the legislation that would ensure against any future tax amnesties. It had been noted that past efforts of revenue agencies to collect from taxpayers were undermined by periodic amnesties.

Another proposed check against abuse is to require companies or individuals availing of the amnesty to file their SALN once every two to three years to allow the government to monitor their tax payments, keep the BIR database current, and discourage them from cheating again.

Another feature that Malacañang wants at the behest of the DOF is to deny amnesty to persons and corporations with pending cases before the Presidential Commission on Good Government, the Sandiganbayan, the Anti-Money Laundering Act, and the courts, including those cases that the courts have already decided on with finality.

Most importantly, the amnesty should not be interpreted as immunity, particularly from criminal liabilities under the Anti-Graft and Corrupt Practices Act. This is contrary to what Congress is willing to extend to people who have already proven themselves to be tax cheats.

Anemic amnesties

However noble the intentions of the government to raise additional revenues for state coffers and widen the tax net of the BIR, there is little optimism that the proposed amnesty bill will yield the expected P2.14 billion from individuals and P7.26 billion from corporate tax cheats based at an amnesty rate of three percent.

Historical records of previous amnesties have proven to be anemic. The 10 amnesties during the time of Marcos only yielded a total of P1.5 billion in collections, while three amnesties during the time of Aquino gave the government only P1.37 billion.

Even the International Monetary Fund had expressed doubts on the level of the potential tax take because historically, amnesties did not earn much for the government.

Also, the projected collection from the tax amnesty does not come close to the more than P600 billion in potential revenues from 1998 to 2002 estimated to have been lost because of rampant cheating of income and value-added taxes among professionals and corporations.

While this bill proposing another round of tax amnesty is expected to earn some money, or at most improve the BIR’s database with the required submission of a SALN, there are other more crucial pieces of legislation that have not moved in Congress. These are the proposed adjustment and indexation of excise taxes on sin products, e.g., beer, cigarettes, and the rationalization of documentary stamp taxes.

These lobby groups or personalities opposing the indexation of sin taxes, DST and GRT measures must really have a strong political clout.

HIV-AIDS on TV

"Isyung Kalakalan at Iba Pa" on IBC News (4:30 p.m. and 10:30 p.m., Monday to Friday) starts today with a discussion of issues that confronts the world as it battles the more insidious silent terrorist, HIV-AIDS. December is the month dedicated to activities focused on promoting awareness of this deadly disease. The target set by the UN in 2001 to raise $10 billion to fund several programs to reduce the incidence of HIV-AIDS is not being met. Donor countries and entities have forgotten their promises as other priorities seem to have taken over. In the meantime, millions are waiting for the inevitable: death caused by AIDS.

In the Philippines, whilst the reported incidence is relatively low, the Department of Health (DOH) is reportedly concerned and has issued warnings about the possibility of an epidemic as returning OFWs continue to be exposed and vulnerable. Safe sex through the use of condoms is still a hot issue, thanks to an inflexible Catholic Church position. Watch it.

‘Breaking Barriers’ takes a holiday break

"Breaking Barriers" on IBC-TV 13 (11 p.m. every Wednesday) will not be aired on the 24th and 31st of December 2003. The next episode is on 7th January 2004 when highlights of interviews conducted during the last half of the year 2003 will be featured. Those who missed some of the previous episodes will have the opportunity to see the main issues discussed during the 2003 season. Watch it.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. If you wish to view the previous columns, you may visit my website at http://bizlinks.linkedge.biz.