MANILA, Philippines – The Tax Amnesty Act or Republic Act No. 11213 was signed into law, but its most crucial part is missing – the provision granting relief to people who failed to pay correct taxes in 2017 and earlier.
Duterte took out sections 10 and 11 of the bill or the part specifying the coverage of the general tax amnesty, as well as who are qualified for the relief.
Had all the measure’s proposals pushed through, taxpayers with unpaid taxes in or before 2017 would have only paid an amnesty tax with the following rates:
- 2% based on the taxpayer’s total assets as of December 31, 2017, as declared in the statement of total assets
- 5% or P75,000, whichever is higher, of an individual, trust, or estate’s net worth as of December 31, 2017
For corporations, the following rates were proposed:
- 5% or P1 million, whichever is higher, for companies with subscribed capital of above P50 million
- 5% or P250,000, whichever is higher, for corporations with subscribed capital of above P20 million up to P50 million
- 5% or P100,000, whichever is higher, for corporations with subscribed capital of below P5 million
- 5% or P75,000, whichever is higher, for juridical entities, including but not limited to cooperatives and foundations that have become taxable as of December 31, 2017
There were also further reductions proposed if the individual paid as soon as the implementing rules and regulations of the law were set.
The general tax amnesty would have encouraged individuals to pay taxes and broadened the taxpayer base.
Less than half the working population are registered taxpayers.
Based on the 2017 annual report of the Bureau of Internal Revenue (BIR), there are over 19 million registered individual taxpayers.
But the Philippine Statistics Authority recorded a working population of over 70 million as of January 2018. (READ: Tax amnesty and holiday the way forward?)
This means there are roughly 50 million people who can be encouraged to register with the BIR through streamlining tax compliance, as well as proposals such as a general tax amnesty.
Why was it vetoed?
Duterte said he understood the legislature’s objective in proposing the general tax amnesty. However, he believes that the proposal, under current circumstances, would lead to more tax evasion.
“[T]he original objective will not be met under the proposed framework. Without provisions breaking down the walls of bank secrecy, setting the legal framework for us to comply with international standards on exchange of formation for tax purposes, and safeguarding against those who abuse the amnesty by declaring an untruthful asset or net worth, a general amnesty that is overgenerous and unregulated would create an environment ripe for future tax evasion, the very thing we wish to address,” the President said.
Duterte also said the government would incur long-term substantial revenue losses without the mentioned measures.
The Department of Finance estimated that the general amnesty program would only generate P6.8 billion in additional revenues, lower than the original P13.6-billion projection due to the absence of provisions on bank secrecy and the automatic exchange of information.
Finance Secretary Carlos Dominguez III also said the government would have lost an additional P53 billion due to enforcement activities if the general tax amnesty provision had not been vetoed.
According to Duterte, “our experience with the 2006 tax amnesty under Republic Act No. 9480 has shown that without safeguards and measures against tax evasion, the objectives of an amnesty such as raising revenues and expanding the tax base cannot be fully achieved.”
Duterte also vetoed some provisions under estate tax amnesty.
The one-time declaration and settlement of estate taxes on properties subject of multiple unsettled estates, as well as the presumption of correctness of estate tax amnesty returns, were taken out in the signed law.
Duterte said the provision on one-time settlement was unfair to those who properly settled their estates early and paid at each stage of transfer.
The President also wants the government to be able to verify declarations, hence the veto on the presumption of correctness of estate tax amnesty returns.
In the end, Duterte asked Congress to pass another general tax amnesty bill to include provisions on the lifting of bank secrecy for fraud cases, inclusion of automatic exchange of information, and safeguards to ensure that net worth declarations are truthful.
What was retained?
The new law kept the amnesty on estate tax and delinquent taxes.
Under the law, the government will now collect just 6% of the net undeclared estate tax for those who died before January 1, 2018.
The law also grants amnesty on delinquencies, where the government will slap lower taxes but individuals can no longer appeal.
Instead, 50% of basic tax excluding interest and surcharges will be sought.
However, taxpayers already facing criminal cases will be paying 80% of the basic tax. – Rappler.com