New tax amnesty law has no spirit, says expert

Ralf Rivas
New tax amnesty law has no spirit, says expert
For tax expert Mon Abrea, President Rodrigo Duterte should have thrown out the tax amnesty law completely, as it is now unable to execute its main goals

MANILA, Philippines – President Rodrigo Duterte recently signed the Tax Amnesty Act into law, but vetoed key features of it due to the lack of other related measures to complement its goals of broadening the tax base. For one tax expert, Duterte should just have vetoed the law entirely.

In an interview with Rappler on Wednesday, February 20, Mon Abrea of the Asian Consulting Group said the current form of the Tax Amnesty Act “is a shallow law” and “a body without a spirit.”

The Tax Amnesty Act’s purpose was to encourage people to pay the right taxes by giving them a one-time offer of significantly reduced rates for previous delinquencies. 

While Abrea lauded Duterte’s move to veto the provision on general tax amnesty due to the lack of provisions lifting bank secrecy for tax purposes, he said legislators should have ensured these provisions were in place or at least tackled at the same time before passing the diluted law.

The lifting of bank secrecy would help in checking whether individuals correctly declared all of their assets.

The provision lifting bank secrecy was originally placed in the first package of the Tax Reform for Acceleration and Inclusion law, but was taken out during the bicameral meeting. 

It was then introduced in the second package, now the new Tax Amnesty Act, but was again omitted because legislators proposed that it be taken up in an entirely separate law which specifically tackles bank secrecy.

“Why didn’t they do that in the first place if they wanted to really push for amnesty? Baka naman takot rin ang mga mambabatas na buksan ang bank documents nila (Maybe legislators are afraid to open their bank documents to scrutiny),” Abrea said.

He added that the Bureau of Internal Revenue (BIR) should have the ability to scrutinize bank documents to ensure that tax amnesties will not be abused.

Duterte also vetoed the provision on estate tax, which grants a one-time declaration and settlement for properties subject to multiple unsettled taxes.

Under the new law, individuals should shoulder the taxes per transfer. For instance, a farmer who inherited land 4 generations ago should pay taxes 4 times and not just once.

Abrea said the veto of that provision essentially defeats the entire purpose of the law.

He said the amnesty was meant to help poor farmers and encourage them to voluntarily pay the right taxes.

So what’s left after all the vetoes? 

Taxpayers who inherited properties get just 6% tax for the transfer.  While it may come as welcome news for those who inherited from their parents, those who need to settle tax obligations from previous generations will not find the new law helpful.

Moreover, the new law grants delinquent taxpayers an option to pay just half or 50% of the entire unpaid taxes. If an individual is already facing cases, he or she needs to pay 80% of all unpaid taxes.

Abrea urged Duterte to push for the vetoed provisions under a new law or “tax amnesty version 2” and another measure which would lift bank secrecy. Doing so would encourage people to register and pay taxes with the BIR. –

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Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.