Tax amnesty: Conscience in play

With one last stroke remaining, the lopsided tax amnesty legislation will be complete. This may yet be the most taxpayer-biased tax amnesty law ever passed, once this enrolled or final bill is signed into law.

Not even a mad rush by the BIR to bring pending cases to the homestretch would be fast enough to beat the expected passage of the amnesty law. It’s because tax investigations have procedures to be followed for due process, and taxpayers have rights and remedies. I mean, when a Letter of Authority (LOA) is issued, the BIR needs to examine and give a notice of informal conference, and the taxpayer is given time to prepare for this conference. Then it can graduate to a preliminary assessment notice, which can be protested – then it can proceed as a final assessment notice that can also be protested.

This process at the BIR can take around six to nine months if everything is efficient. And if needed, the case can go to court where it can languish like a prisoner.

The BIR simply can’t race against the tax amnesty law. Anyone can wipe out all their sins from the past and have peace, without fear of reprisal, on 2017 and prior years by paying two percent of their gross assets or five percent of their net assets as of December 31, 2017. You may lose your peace if you’re back to old habits after the availment but you can risk waiting for the next amnesty, so it seems. Allow me to educate my readers further on why this law is so favorable to non-compliant taxpayers, or even the criminally minded:

1. Bank accounts of those who avail the tax amnesty remain confidential. There were initial deliberations on the waiver of the secrecy of bank deposits for those availing of the amnesty but this that did not materialize because the legislators don’t want it. It perfectly makes sense that those who wish to come clean should be prepared to show they have nothing to hide. But it became evident that for many, full disclosure is a road too high, or a risk not worth taking.

2. The amnesty application, once accepted, cannot be disturbed or examined anymore. The sworn Statement of Total Assets or Statement of Assets and Liabilities submitted with the amnesty tax return shall be considered “conclusively correct”. This means it is possible to apply for general tax amnesty from all national taxes covering 2017 and all prior years by selecting assets to be declared at one’s discretion, without any professional help or audit. By swearing on the declaration before any notary public, the declaration will be taken as solid truth for eternity, even if in fact the declaration is grossly understated or riddled with much falsity.

3. The amnesty application may protect those who have ill-gotten wealth, or are guilty of graft or corrupt practices or of money laundering. I say this because all declarations and information disclosed in availing of the tax amnesty shall be considered confidential and cannot be used in investigation or prosecution before any administrative, quasi-judicial or judicial bodies. Sure, there are other sources of evidence outside the tax amnesty application. But if a criminal lawyer can make a defense out of “nothing”, what more if there is a technical ammunition that can be found in the law. The only ones who cannot use this benefit are those with pending cases already. For the rest, it may feel like crossing a border outside criminal jurisdiction.

4. Even if your tax fraud case is already pending before the court, you can still avail of amnesty. Note that a pending tax fraud case with the BIR will not disqualify one from availing of a general tax amnesty unless the tax fraud case is already in court. But if already in court, the tax fraud case can still be applied for amnesty by simply paying 60 percent of the basic tax. If it is a regular case, even if already with a final and executory judgment by the court, you can still steal it by paying 60 percent of the basic tax. For other ongoing investigations and regular assessments, just pay 40 percent of the basic tax and you close those cases.

I am reminded of shrewd customers who deliberately delay their payments until their accounts become past due for several years. When you finally corner them to pay, they ask for a huge discount because the account is an old account anyway. Sounds familiar?

5. The database from tax amnesty won’t do much harm. The law contains a provision about an information management system (IMS) database to capture the broadened taxpayer base or broadened income base from the tax amnesty. But this is at best aspirational, if not a wrong expectation. Note that those who avail and declare are not held accountable because they will not be examined on what they did not declare. They start only with what they declare. Even a seriously flawed declaration is taken as absolute truth. So the “absolute truth” in the IMS database could really be absolute lies. Now how can that lead to capture?

The saving grace in this legislation is not in the law, but in the conscience of those who avail – in the conscience of our people. If not conscience, then maybe a bit of summoning of love for country can minimize the abuse. The government, taxpayers, and citizens are one nation. We cannot treat our own government like mendicants in our own country – like begging for alms from those who habitually underpay and feign some penance at their own leisure. By all means, let’s avail of amnesty. But let’s avail honorably.

* * *

Alexander B. Cabrera is the chairman and senior partner of Isla Lipana & Co./PwC Philippines. He is the chairman of the Integrity Initiative, Inc. (II, Inc.), a non-profit organization that promotes common ethical and acceptable integrity standards. Email your comments and questions to [email protected]. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.