By Butch Fernandez & Bernadette D. Nicolas
SENATE leaders on Monday lamented the presidential veto of the general tax amnesty provisions under the Tax Amnesty Act. They blamed the President’s liaison officer in Congress for not telling lawmakers early enough that the Palace wanted the bank secrecy lifting to be approved first in order to prevent tax evaders from using the amnesty with the secrecy as shield.
The Palace had also envisioned a tax amnesty with bank secrecy lifting as part of a slew of safeguards against tax evasion, seen to generate over P70 billion in revenues.
On Monday, lawmakers signalled their determination to refile the vetoed legislation, this time with a clearer understanding of what the Executive really wants.
President Duterte signed late Friday the Tax Amnesty Act of 2019 but vetoed two provisions for a general tax amnesty, saying that without the lifting of bank secrecy, this would only create an environment conducive to tax evasion. He retained only the provisions on estate tax amnesty and the amnesty on delinquency taxes.
Finance Secretary Carlos Dominguez III had explained at the weekend that, “The DOF [Department of Finance supports a general tax amnesty for everyone with pending tax cases; however, like what we have been advocating in Congress, the President saw it fit that this happens with the corresponding tax administration measures to strengthen enforcement against current tax evasion—the lifting of bank secrecy laws and setting the legal framework for the automatic exchange of information mechanisms.
Thus, the general tax amnesty provisions were vetoed. The
President thus encourages Congress to pass another general amnesty law with
these provisions,”
he added.
The President said in his veto message, “The general amnesty program is meant to give taxpayers a fresh start as well as to signal the start of a fair tax enhancement campaign by the tax authorities. It is not meant to be abused for the gain of the few and the loss of the rest of the citizenry.”
Such safeguards against tax evasion “are estimated to contribute P76.6 billion to the public funds in the next five years, which we hope to use to better our infrastructure and services,” he added.
PLLO blamed
Senate leaders were miffed, not by the presidential veto itself but the apparent failure of the Presidential Legislative Liason Office (PLLO) to convey the Executive’s position on the tax amnesty issue when lawmakers were deliberating the revenue measure.
Senate President Vicente Sotto III minced no words in pinning the blame on the PLLO when sought for his reaction to Duterte’s veto.
Senators said they were belatedly informed that what the President reportedly wanted was for Congress to first pass a law lifting bank secrecy restrictions in cases involving fraud.
Asked if the Senate will front-load the Palace-desired bills soon as Congress resumes session on May 20, senators sidestepped the query, indicating it is all up to the PLLO.
“This is again another testament that we need to revitalize or even upgrade the PLLO,” Sotto said in a Viber message to Senate reporters.
Sotto bewailed that “this is the nth time that we do not know what the Executive Department wants from us.”
The Senate President pointed out that “like all the other bills vetoed, we could have addressed the provisions that the Executive department does not want to execute.”
He added: “the Legislative department does not consult a crystal ball to know [what the President wants from Congress].”
The Senate leader clarified, however, that “it is up to the President.”
“If we want to keep on wasting time, not to mention money, on vetoed bills then let’s just sit and relax,” Sotto added.
The signed measure, Republic Act 11213, seeks to enhance revenue administration and collection by granting an amnesty on all unpaid internal revenue taxes imposed by the national government for taxable year 2017 and prior years. This is with respect to estate tax and other internal revenue taxes and tax on delinquencies.
‘Prone to abuse’
Presidential Spokesman and Chief Presidential Spokesman Salvador Panelo said in a statement on Monday the President believes that the vetoed provisions would be “prone to abuse by those who would declare assets or net worth not reflective of their real income, in light of present laws mandating confidentiality of all bank deposits.”
In his veto message to the House of Representatives and the Senate, the President also urged Congress to pass another general tax amnesty bill that includes the lifting of bank secrecy for fraud cases, the inclusion of automatic exchange of information and safeguards to ensure that asset or net worth declaration are truthful.
“Without the provisions breaking down the walls of bank secrecy, setting the legal framework for us to comply with international standards on exchange of information 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,” Duterte said.
Citing the government’s experience with the 2006 tax amnesty under Republic Act 9480, the objectives of an amnesty such as raising revenues and expanding the tax base cannot be fully achieved without safeguards and measures against tax evasion.
Besides, the President also said this could lead to the government incurring long-term substantial revenue losses.
Working with Congress
Dominguez said earlier that the DOF will continue to work closely with Congress in line with the creation of the general amnesty measure, which will include the proper safeguards as being the lifting of the bank secrecy and automatic exchange of information provisions.
“We will work with Congress to pass a general tax amnesty with the proper safeguards, such as the lifting of bank secrecy provisions and the AEOI, if not in this Congress, then in the next. We shall work with them, like we always have, to have it passed immediately,” he said.
He also pointed out that the vetoed general amnesty provisions will only generate an estimated P6.8 billion in revenues, as opposed to a measure that includes the two safeguarding provisions, which is estimated to generate around P13.6 billion in revenues.
“Plus, the AEOI and lifting of bank secrecy could raise up to P76.6 billion in direct and indirect revenues in the next five years. Moreover, for 2019 there would be an indirect revenue loss of around P53 billion from enforcement activities if the general tax amnesty was not vetoed,” he added.