‘Safeguards’ needed in proposed tax amnesty measure

The think tank Action for Economic Reforms (AER) yesterday said the proposed tax reform package 1B, which included tax amnesty, would be “pointless” if it would not include the relaxation of the bank secrecy law.

“Excluding the waiver of the bank secrecy law in the proposed tax amnesty bill, which is currently being discussed in the Senate, will result in a toothless law as tax evaders who apply for amnesty will be able to under declare taxable assets without the government knowing any better,” the AER said in a statement.

Besides relaxing the bank secrecy law, the AER is also pushing for the institutionalization of reforms in tax administration and collection to “prevent harassment and curb abuses of discretion by the Bureau of Internal Revenue.”

“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 under 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?” AER economist and fiscal policy coordinator Jo-Ann Diosana said.

A technical working group meeting was conducted by the Senate ways and means committee last Wednesday to discuss the pending measures for general and estate tax amnesties.

During the meeting, according to AER, “stakeholders called for the exclusion of customs duties from the general tax amnesty.”

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

“The AER welcomes a legislation that widens the tax base and makes tax administration more efficient and less prone to corruption. The group calls 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,” it said.

This month, Finance Secretary Carlos G. Dominguez III said the government was eyeing to implement the much-awaited tax amnesty by April next year to coincide with the deadline for the filing of income tax returns.

Tax amnesty forms part of package 1B, an off-shoot of the Tax Reform for Acceleration and Inclusion (TRAIN) Act under Republic Act No. 10963 signed by President Duterte last December.

Besides the general tax amnesty, package 1B also includes estate tax amnesty, higher motor vehicle user’s charge, bank secrecy relaxation and automatic exchange of information.

Tax package 1B was a result of the Senate’s removal of the tax administration measures from the original first tax reform package passed by the Lower House last year under House Bill No. 5636.

Once package 1B is passed, it will add about P40 billion in revenue this year.