Corporate Securities Info

Slim chance of a tax amnesty

From the looks of it, no tax amnesty proclamation is forthcoming anytime soon.

Finance Secretary Carlos Dominguez III recently said that a tax amnesty would be issued only after Congress lifts the law on secrecy of bank deposits for tax purposes, that is, the government can examine the bank accounts of suspected tax evaders to determine their compliance with tax laws.


At present, bank deposits can be looked into only in the following instances: (a) if the depositor agrees to it in writing; (b) in impeachment cases; (c) when ordered by a court in cases of bribery or dereliction of duty by public officials; and (d) when the deposit is the subject matter of a litigation.

The bank secrecy law (Republic Act No. 1405) was enacted in 1955, or 62 years ago. At that time, banks were perceived by the public as institutions where money can be deposited for future use and other legitimate purposes. Bank accounts were not opened to launder money, hide ill-gotten wealth or be used to commit crimes.


In the light of the high level of ethical values then prevailing, the four exceptions mentioned were considered sufficient to justify breaching the confidentiality of bank deposits.

Repeated attempts to amend the secrecy rules to make them responsive to the times, or to thwart the use of bank facilities for unlawful activities, have failed.

The closest those rules were, in a limited sense, modified was in 2001 when the Anti-Money Laundering Act was enacted and the Anti-Money Laundering Council was given the authority to inquire into or examine, after compliance with certain procedures, bank deposits suspected to have violated anti-money laundering regulations.

Last year, in the wake of the heist of $81 million from the Bangladesh central bank using the facilities of a local bank, discussions on amending bank secrecy rules went on high gear.

Unfortunately, despite the adverse international publicity that the scandal generated and the Senate conducting several hearings on the incident, nothing happened.

We are still stuck with a law that ties the hands of law enforcers in running after people who use the confidentiality of bank deposits to shield themselves from prosecution for money-related crimes.

It is wishful thinking for Dominguez to believe (or hope) that Congress, which is supposedly controlled by President Duterte’s party mates and allies, will easily accommodate his proposal to relax bank secrecy rules.


In the first place, his proposal is not something that will redound to the benefit or advantage of the lawmakers. They have nothing to gain, financially or politically.

Unless pork barrel-like incentives accompany the amendment of the bank secrecy law, it is doubtful if the measure would even pass the committee level in either chamber.

For legislators who have skeletons in their closets about their public or personal financial transactions, easing the examination of bank accounts for tax purposes would be like putting a noose around their neck. No way will they agree to that even if they get a phone call from Malacañang.

Under these circumstances, Dominguez should drop the idea of increasing government revenues by way of a tax amnesty that is tied to Congress amending the bank secrecy law. He has laid down an impossible condition that requires divine intervention to be met.

Note that from the martial law years of the Marcos dictatorship to the Aquino administration, several tax amnesty programs were adopted to raise additional revenues from different tax levels, e.g. income tax, improperly taxed motor vehicles, real property tax and travel tax.

True, these programs raised (on the short term) additional funds for the government. But they missed the more important objective of a tax amnesty: Becoming honest taxpayers again.

Many of those who availed of past tax amnesties took advantage of their benefits but returned to their old ways. That’s the painful moral hazard of a tax amnesty.

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