taxes

[Ask the Tax Whiz] Who would support genuine tax reforms if elected?

Mon Abrea
[Ask the Tax Whiz] Who would support genuine tax reforms if elected?

DEBATE. Presidential candidates pose for a photo before the start of the Comelec presidential debate at the Sofitel Philippine Plaza Manila in Pasay City on March 19, 2022.

Angie de Silva/Rappler

The Philippine Tax Whiz discusses the tax reform proposals of presidential bets and the controversial tax issues of some of these candidates

Good governance is more likely to lead to an increase in tax collections. While tax administration is crucial in improving tax collections, equally important in addressing tax evasion and smuggling is eradicating graft and corruption in government. The Philippines’ next president must have the moral ascendancy, track record of public service, and a clean tax history to set a good example to other public officials and the taxpaying public.

In your interview with Boy Abunda on the Tough 10 Most Controversial Tax Issues, you were asked about the disqualification cases against Ferdinand Marcos Jr. and the Marcos family’s unpaid estate tax liability. Is it true that Marcos was convicted of a tax violation which should have resulted in perpetual disqualification from public office? How can the Marcos family pay the P23-billion estate tax liability if the properties would be sequestered by the government once proven ill-gotten? Is the Marcos camp correct in saying they cannot settle the case because it’s still pending in court? In addition, did the Court of Tax Appeals (CTA) already clear the P3.3-billion tax liability of Senator Manny Pacquiao?

Yes, Marcos was convicted. The Quezon City Regional Trial Court found him guilty of violation of the National Internal Revenue Code (NIRC) of 1977 for failure to file his income tax returns from 1982 to 1985. While there was a modification of the sentence, the Court of Appeals affirmed the conviction. And since Marcos withdrew his appeal before the Supreme Court (SC), the resolution became final and executory on August 31, 2001.

Presidential Decree No. 1994, s. 1985, signed by former president Ferdinand Marcos, amended certain provisions of the NIRC, which includes Chapter II – Crimes, Other Offenses and Forfeitures, SEC. 286[c]. “If the offender is a public officer or employee, the maximum penalty prescribed for the offense shall be imposed and, in addition, he shall be dismissed from the public service and perpetually disqualified from holding any public office, to vote, and to participate in any election.” This decree took effect on January 1, 1986, when the annual income tax return of Marcos Jr. for 1985 which he failed to file was due.

Payment of the P23-billion unpaid estate tax liability is the problem of the Marcos family, not the government. However, the Bureau of Internal Revenue can issue a warrant of distraint and/or levy their properties and/or file criminal charges for failure to file the estate tax. The ill-gotten wealth subject to the recovery case of the Presidential Commission on Good Government which is still pending in court is separate from the estate tax liability which became final and executory on March 9, 1999, based on the SC’s entry of judgment.

Meanwhile, Pacquiao’s tax case is still pending in court. On July 27, 2018, the CTA lifted the sanction on the pending P3.3-billion tax case of the senator. The SC returned the case to the CTA, which had imposed a surety bond worth P4.9 billion in 2016.

Was it Senator Manny Pacquiao who authored a bill to further increase excise tax on cigarettes? Did Vice President Leni Robredo oppose the passage of the Tax Reform for Acceleration and Inclusion (TRAIN) law due to the imposition of excise tax on diesel in 2017? Is Senator Panfilo Lacson proposing an increase in corporate income tax after the passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law, which effectively reduced it from 30% to 20% for small businesses and 25% for regular corporations?

In 2017, Pacquiao introduced Senate Bill No. 1599, seeking to raise the excise tax on tobacco products and amending the Sin Tax Reform Act of 2012 to lower the number of diseases in the country. SB 1599 seeks to increase the excise tax to P60 from P30 per pack, and the annual excise tax to 9% from 4%. The senator said we can generate revenue from other sources without compromising public health. As of January 1, 2022, the excise tax on cigarettes is P40 per pack until December 31, 2022.

In 2018, Vice President Leni Robredo urged the government to reconsider imposing excise tax on fuel.  She joined the call to suspend the provision in the TRAIN law that raised the excise tax on fuel.

Lacson did not propose an increase in corporate tax. He just commented on the alleged tax hike proposal to manage the country’s national debt. He said that he doesn’t understand why we are going to increase taxes after passing the CREATE law. The senator wants to revisit some tax laws rather than pass another law.

Who among the presidential candidates signed a waiver of bank secrecy to allow access to his or her bank accounts? Will they lift the bank secrecy law to unlock potential revenue collections and address corruption, tax evasion, and other financial crimes? Are they willing to publish or make their Statement of Assets, Liabilities, and Net Worth (SALN) accessible to the public for transparency?

During the 2016 elections, Robredo signed a waiver allowing the Ombudsman to access her financial records. If elected as president, she would also require all public officials to disclose their SALN and subject them to lifestyle checks. 

While they haven’t signed any bank secrecy waiver yet, Lacson, Pacquiao, and Manila Mayor Isko Moreno are willing to sign such a waiver if they get elected as president. They also don’t have any problems with disclosing their SALN to the public if elected.

However, Marcos said he will not make his SALN public, especially if it would be used for political attacks. He cited the case of former chief justice Renato Corona, whose SALN was used to impeach him. Marcos has also not signed any bank secrecy waiver.

Who supports the suspension of excise tax on fuel and what are their long-term solutions to address rising prices? How much would the potential revenue loss be if excise tax is suspended?

All presidential candidates support the call for suspension of excise tax on oil products except Marcos, given the potential revenue loss as explained by the Department of Finance. Robredo proposes socialized suspension of excise taxes on fuel products generally used by the public, especially to help farmers, fisherfolk, and other marginalized sectors.

If the excise tax on petroleum products is suspended, the government would lose P117 billion in revenues or 0.5% of the country’s gross domestic product, according to the Department of Budget and Management.

Who among the presidential candidates belong to a political dynasty? Would they prohibit political dynasties owing to the fact that these are linked to poverty and corruption?

Both Marcos and Pacquiao belong to political dynasties. The Romualdez-Marcos family has been in politics even before the Marcos dictatorship, while the Pacquiao family started their political dynasty in General Santos City with two brothers in Congress and other relatives in local government.

Marcos said people cannot be stopped from “wanting to serve,” while Pacquiao said “we are a democracy and the people vote for the officials.”

All other presidential candidates are against political dynasties. Our Constitution prohibits political dynasties but there is no enabling law to implement this. – Rappler.com

Mon Abrea, CPA, MBA, is the co-chair of the Paying Taxes-EODB Task Force. With the TaxWhizPH mobile app as his brainchild, he was recognized as one of the Outstanding Young Persons of the World, an Asia CEO Young Leader, and one of the Ten Outstanding Young Men of the Philippines because of his tax advocacy and expertise. Currently, he is the chairman and CEO of the Asian Consulting Group and trustee of the Center for Strategic Reforms of the Philippines – the advocacy partner of the Bureau of Internal Revenue, Department of Trade and Industry, and Anti-Red Tape Authority on ease of doing business and tax reform. Visit www.acg.ph for more information or email him at mon@acg.ph and download the TaxWhizPH app for free if you have tax questions.