Tax amnesty: A welcome bonus

The House of Representatives and the Senate of the Philippines are due to tackle Package One-B of the comprehensive tax reform program of the Duterte government as a bicameral conference committee. These are House Bill (HB) Nos. 8645, 4814 and 8554, and, Senate Bill (SB) No. 2059, otherwise known as the Tax Amnesty Act of 2018.

According to the declaration of policy of the respective bills, they collectively aim to enhance the revenue administration and collection of the government by widening the tax base. The earlier concluded HB No. 8554 and 4814 aims to assist with revenue administration and collection for unpaid national internal revenue taxes and estate taxes, respectively. Meanwhile SB No. 2059 and HB No. 8645, both recently-approved on third reading towards the tail-end of November, aim to assist with revenue administration and collection of estate taxes, other internal revenue taxes and tax on delinquencies.

The proposed bills plan to cover estate taxes of decedents who died on or before Dec. 31, 2017, with or without assessments duly issued, or with unpaid estate taxes outstanding as of Dec. 31, 2017. On the other hand, the general tax amnesty is proposed to cover all national internal revenue taxes for taxable year 2017 and prior years, with or without assessments.

Availment of tax amnesty is only the first step, however, as taxpayers still have to comply with documentary requirements to be set by the Department of Finance, Bureau of Internal Revenue, and other concerned government agencies in their implementing rules.

In the case of Commissioner of Internal Revenue v. Marubeni, GR No. 137377, dated Dec. 18, 2001, the Supreme court explained that tax amnesty “partakes of an absolute forgiveness or waiver by the government of its right to collect what is due it and to give tax evaders who wish to relent a chance to start with a clean slate.” The court expounds in the same case that similar to tax exemptions, the terms of the amnesty must be construed strictly against the taxpayer and liberally in favor of the taxing authority.

In the last tax amnesty law, Republic Act 9480, otherwise known as the Tax Amnesty Act of 2007, any disagreements in the implementation of the law were left up to the courts to settle. In Commissioner of Internal Revenue vs. Covanta Energy Philippine Holdings Inc., G.R. No. 203160, dated Jan. 24, 2018, the Supreme Court affirmed that taxpayers are eligible to the immunities of the government tax amnesty program once all the suspensive conditions imposed under the law and implementing rules were complied by the taxpayer. In the case, the Bureau of Internal Revenue questioned the entitlement of Covanta Energy Philippines Holding, Inc. to tax amnesty for failure to sufficiently comply with documentary requirements under the tax amnesty law. The court pointed out that while the immunities and privileges granted under the tax amnesty law is not absolute, the immunities only cease upon proof of underdeclaration of the taxpayer’s net worth by 30 percent  and ruled that the documentary requirements were sufficiently complied by the taxpayer.

One potential solution to issues like this from popping up again is the proposal under HB No. 8554 which requires the issuance of a Certificate of Availment of Amnesty within a year of filing of the Tax Amnesty Return.  Moreover, it is expected that the bicameral conference committee will also tackle other pains experienced under the previous tax amnesty law program.

While there is yet no indication when the bicameral committee plans to conclude deliberations, the tax amnesty bill would be a welcome present to Filipino taxpayers.  We welcome the initiative of the government to ease the burden of taxpayers by promoting tax amnesty and settlement of unpaid taxes which will trickle down to settlement of outstanding tax assessments and court cases.  The proposed tax amnesty plan offers a chance to individual and corporate taxpayers to unburden themselves of unpaid taxes and to start the new year with a “clean slate” with respect to their taxes.

Laurice Claire C. Penamante is a supervisor from the tax group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice and Tier 1 transfer pricing practice by the International Tax Review.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email ph-[email protected] or [email protected].