Truthful disclosures

Thanks to the impeachment trial of Chief Justice Renato Corona, the public has become more aware about the Statement of Assets, Liabilities and Net Worth (SALN) that all government employees are required to file every year.

Aside from stating his financial condition, the employee must disclose, if any, his business interests, financial connections and relatives in the government service.

Under pain of administrative and criminal sanctions, the SALN should be true and accurate, and sworn to before a notary public or any person authorized by law to administer oaths.

The annual reporting system is premised on the idea that an employee would be deterred from unduly enriching himself in office if he knows that his finances can, through the SALN, be checked by the authorities.

That’s the noble intention of the law. But the problem is, it did not create the office that will specifically review the SALNs and go after those who fail to truthfully prepare them.

In theory, that responsibility rests with the employee’s mother unit. Or, perhaps in a larger sense, with the Office of the Ombudsman which, under the Constitution, is supposed to run after erring public officials.

With nobody really in charge, the SALNs have not been very effective in the fight against graft and corruption in the government.

Treatment

Sad, but true, most government employees are dismissive of the SALN. For the rank and file, it’s just another paperwork; for office bigwigs with some material resources to their name (whether or not legitimately acquired), it’s something they do not take seriously in the belief that it will only be dumped in the storeroom.

These reports become “useful” when, for example, an official refuses to succumb to pressure from unscrupulous contractors and the latter use the SALN as blackmail instrument, or some employees are suspicious (or jealous) of a co-employee’s wealth.

An anonymous letter or complaint sent to the authorities and, for good measure, copy furnished the media, could set the wheels in motion for the investigation and prosecution of the employee who took lightly the implications of submitting an inaccurate SALN.

If recent reports are to be believed, some government personnel have been dismissed from the service for, among others, failure to include earnings from a market stall and omission of the name of a relative in the government service.

Untruthful disclosure of finances is not, however, confined to government employees. A similar norm of conduct exists in the private sector, and the public in general, in their transactions with the government.

Tax returns

The most glaring example is the annual income tax return. Except for fixed income employees (both private and government) whose income taxes are withheld at source, it is doubtful if the returns of entrepreneurs, lawyers, accountants, physicians and other professionals meet the tests of truth and accuracy.

The untruthful disclosure comes in the form of unreported income, manufactured expenses, questionable deductions, clever tax avoidance schemes and, worse, outright tax evasion.

The Bureau of Internal Revenue has its hands full filing and prosecuting tax fraud cases against taxpayers who think taxes are meant to be paid only by those who are not smart or daring enough to fudge their records to keep the BIR from getting the government’s share in their income.

It’s galling that some of these tax dodgers have the nerve to project themselves as social figures with golden hearts when, in the privacy of their offices, they have no qualms about massaging their tax returns to deprive the government of the taxes due from them.

Until the BIR comes close to the reputation of the Internal Revenue Service of the United States where the mere mention of the words “IRS” can send shivers down the spine of taxpayers, the submission of true and accurate income tax returns by the people who occupy the higher levels of our social pyramid will remain a piping dream.

Reports

Untruthful disclosures also happen in the audited financial statements that companies are required to submit yearly to the BIR and the Securities and Exchange Commission.

Through these statements, the public can get a bird’s eye view of a company’s financial condition. If prepared in accordance with accounting rules, the reader would know, among others, whether its funds are properly managed, or its revenues are keeping up with the costs of operation.

The reporting rules have been crafted to meet every possible situation or contingency in the business in which a company may be engaged in, which is akin to filling the blanks with the right facts and figures.

With the standards to be followed clearly set out, and what can and what need be disclosed already defined, the preparation of the company’s financial records should not be as contentious as before when a “question-and-answer” format was the norm.

Under the present rules, the figures are supposed to speak for themselves. Side notes or annotations about how or why certain entries were made should be minimized, if not totally done away with.

The idea is, at a glance and without having to scan the rest of the statement for explanations or qualifications, the reader would be able to get a picture of the company’s true financial health.

Unwittingly or otherwise, some financial statements either fail to state the correct numbers, put the entries in the wrong columns or stretch the interpretation of the standards to justify an action that would put the company in a favorable light.

If caught committing any of these infractions, the excuse usually given is either lack of familiarity or misinterpretation of the applicable accounting standard.

In the future, in case the issue of untruthful disclosure is raised in any proceeding, it may be a good idea to ask who is without sin to cast the first stone.

(For feedback, please write to <rpalabrica@inquirer. com. ph>.)