Tax amnesty futile without bank waiver, says think tank

MANILA, Philippines — A planned tax amnesty program of the government would be pointless without the waiver of the bank secrecy law, according to fiscal policy think tank Action for Economic Reforms (AER).

AER fiscal policy coordinator and economist Jo-Ann Diosana said failure to include the waiver of the bank secrecy law in the proposed tax amnesty bill currently being discussed in the Senate would result in a toothless law.

Diosana said tax evaders who apply for amnesty would be able to under declare taxable assets without the government knowing any better.

The think tank suggests that reforms in tax administration and collection should be institutionalized to prevent harassment and curb abuses of discretion by the Bureau of Internal Revenue (BIR).

“A general amnesty will not work unless bank secrecy is waived and reforms in the BIR are put in place to curb discretion and harassment. How can we know that payments from amnesty are tax compliant, given info asymmetry that waiving of bank secrecy can address? Why will a tax evader come out in the open when the information he provides will be used by BIR examiners to harass him in the future?” she said.

The Senate ways and means committee is already discussing at least five bills proposing a general tax amnesty and an estate tax amnesty.

The bills, which were approved in the Lower House last year, could result in total revenue of P46 billion for the government and widen the tax base to include former tax evaders.

At a Technical Working Group meeting held last June 20, stakeholders called for the exclusion of customs duties from the general tax amnesty.

The Department of Finance, meanwhile, wants to include provisions for a tax amnesty for delinquents so the government can collect more revenue and clear judicial dockets.

AER welcomes legislation that widens the tax base and makes tax administration more efficient and less prone to corruption.

The group is calling on lawmakers to ensure that the amnesty law is not watered down and that the proper safeguards are in place to ensure the overall success of the tax amnesty program and the government’s wider tax reform program.

The Finance department is looking at pushing back the implementation of the tax amnesty program to April next year in time for the income tax filing season of the BIR.

Finance Secretary Carlos Dominguez had said the launch of the program may be delayed to next year due to the expected timing of the passage of Package 1B of the comprehensive tax reform program (CTRP) in the third quarter of the year.

Under the bill, taxpayers who wish to seek amnesty should pay a rate of eight percent of their net worth covering taxable year 2017, or P10,000 to P10 million – depending on their taxpayer classification – whichever is higher.