The House Committee on Ways and Means is now finalizing Part B of Package 1 of the Tax Reform for Acceleration and Inclusion (TRAIN) Act seeking to grant amnesty on all unpaid internal-revenue taxes, while relaxing the Bank Secrecy Law.
If things go according to the panel’s plan, House Bill (HB) 7105 would be presented for plenary approval next month.
“The timeline for the passage of HB 7105 in the House of Representatives’ plenary is first quarter of this year…that’s our target,” Rep. Dakila Carlo Cua of Quirino, the panel chairman, told the BusinessMirror.
The bill will grant amnesty on all unpaid internal-revenue taxes imposed by the national government for taxable year 2017 and prior years.
It was filed on February 2 by its principal authors Cua, Speaker Pantaleon Alvarez and Majority Leader Rodolfo Fariñas of Ilocos Norte.
Cua said the lower chamber is eyeing to approve the bill on third and final reading before Congress goes on recess on March 21.
Poor tax collection
According to Cua, this proposed law is needed as the Philippines experienced poor tax collections in the previous years.
It is meant to combat corruption, simplify taxation and improve tax collection.
Aside from giving the government flexibility in collecting taxes and immediate revenues, Cua said the bill also seeks to expand the taxpayer base.
“As we all know, there exist a vast number of unsettled taxes that cannot be legally collected by our executive agencies without going through the rigorous process laid down by law. Likewise, an unaccounted number of individuals who have not [paid], but are now willing to pay, their taxes are discouraged by threat of prosecution,” he said.
Whether disputed and uncollected taxes are caused by erroneous assessment or by the fault of the taxpayer, the lawmaker added, “it is high time for us to move forward, and provide taxpayers the opportunity to be responsible by offering them a clean slate.”
Moreover, the other authors of the bill noted that the government’s low tax collections could be attributed to many factors, such as poor tax administration, low collection efficiency, corruption and flawed tax policies.
They also said dishonest taxpayers were able to collude with corrupt government officials and employees into getting away with not paying the correct amount of taxes; while taxpayers who are willing to pay the correct amount of taxes are discouraged from doing so by poor administrative policies.
Amnesty package
Finance Secretary Carlos Dominguez III has said the amnesty package covers two-thirds of what the government proposed under the first package of the Comprehensive Tax Reform Program (CTRP) of the Duterte administration.
The Department of Finance said it was still computing the expected revenue gains from the amnesty package, or the CTRP Package 1-B.
Part A of the proposed TRAIN Act, which was implemented on January 1, is targeting to raise P130 billion in revenues to finance the administration’s ambitious infrastructure program.
The bill
To be covered by HB 7105 are all national internal-revenue taxes for the taxable year 2017 and prior years, with or without assessment duly issued therefore, that have remained unpaid as of December 31, 2017.
Under the measure, any person who wishes to avail himself of tax amnesty authorized and granted under the law shall file with the Bureau of Internal Revenue (BIR) a notice and Tax Amnesty Return accompanied by financial statements or a Statement of Assets, Liabilities and Net Worth (SALN) as of December 31, 2017, in such form as may be prescribed in the implementing rules and regulations of the act, and pay the applicable amnesty tax within two years from the effectivity of the implementing rules and regulations (IRR).
Except for the persons or cases covered in the Act, any person may avail himself of the benefits of tax amnesty after paying the prescribed amount.
The bill provides individuals (whether Filipino, alien, resident, or nonresident), trusts and estates with an 8-percent flat tax rate, or P10,000, whichever is higher.
Partnerships, stock corporations and taxable cooperatives, with capital, or subscribed capital, of up to P10 million shall pay 8-percent tax rate of the net worth, or P10,000, whichever is higher.
Meanwhile, partnerships, stock corporations and taxable cooperatives with capital, or subscribed capital, of above P10 million but not exceeding P50 million shall pay 8 percent of the net worth, or P100,000, whichever is higher.
Partnerships, stock corporations and taxable cooperatives, with capital, or subscribed capital, of above P50 million but not exceeding P100 million shall pay 8 percent of the net worth, or P1 million, whichever is higher.
Also, partnerships, stock corporations and taxable cooperatives with capital, or subscribed capital, of above P100 million shall pay 8 percent of net worth, or P10 million, whichever is higher.
Nonstock corporations, government-owned and -controlled corporations exercising propriety functions, meanwhile, shall pay 4 percent of the net worth, or P50,000, whichever is higher.
Moreover, the bill said taxpayers who filed their balance sheet/SALN for 2017 income-tax returns, and who desire to avail themselves of tax amnesty, shall amend such previously filed statements by including all undeclared and under-declared assets and/or liabilities, can pay an amnesty tax equal to 8 percent, based on the resulting increase in net worth.
In cases where assessments were issued against a taxpayer, the measure said amnesty tax shall be equivalent to 50 percent of the basic tax assessed.
Exempted
Also, the measure provides that those who availed themselves of the tax amnesty shall be exempted from the payment of taxes, and shall be immune from any civil, criminal or administrative penalties under the National Internal Revenue Code (NIRC), as amended, arising from the failure to pay any and all internal-revenue taxes for taxable year 2017 and prior years.
However, the measure said immunities and privileges shall not apply where the person failed to file a SALN or Tax Amnesty Return, or in the administrative cases initiated by the BIR to prove the understatement of SALN as prescribed under the proposal.
“Any income or assets not included or declared in compliance with this Act shall not be covered by this Act, and shall be subjected to taxation in accordance with the provisions of the National Internal Revenue Code and other special laws,” the bill said.
Not covered
The bill also said the tax amnesty shall not cover the following persons, or cases existing, as of the effectivity of this proposed act:
- Withholding agents with respect to their withholding tax liabilities;
- Those with pending cases falling under the jurisdiction of the Presidential Commission on Good Government;
- Those with pending criminal cases filed in court for tax evasion and other criminal offenses under the NIRC, felonies of frauds, illegal exactions and transaction, and malversation of public funds and property under the Revised Penal Code;
- Those with pending cases involving unexplained or unlawfully acquired wealth or under the Anti-Graft and Corrupt Practices Act and plunder law;
- Those with pending cases filed in court involving violation of the Antimoney Laundering Act; and
- Tax cases that are subject of final and executory judgment by the courts.
Penalties
For penalties, the bill said any person who, having filed a statement or Tax Amnesty Return under the Act, willfully understates his net worth to the extent of 30 percent or more shall, upon conviction, be subject to the penalties of perjury under the Revised Penal Code.
Also, it said immediate tax fraud investigation shall be conducted to collect all taxes due, including increments, and to criminally prosecute those found to have willfully evaded lawful taxes due.
The bill added that any person who makes an unlawful divulgence of information contained in the Tax Amnesty Return or the SALN shall be penalized by a fine of not less than P250,000 and imprisonment of not less that one year but not more than six years.
For the purposes of enhancing revenue administration, revenue collection and policy formulation, the bill said the Department of Finance (DOF), in coordination with the BIR, the Department of Trade and Industry, the Securities and Exchange Commission, and other concerned government agencies shall institute an Integrated Information Management Program for the effective use of information declared or obtainable from the Tax Amnesty Returns and the SALNs required to be filed under this proposal.
Also, the measure said an amount equivalent to P400 million of the collection from the tax amnesty herein shall accrue to the DOF and shall be used exclusively for purposes of instituting an Integrated Information System as mandated under this bill.
Bank secrecy
The measure also authorizes the commissioner of the BIR to inquire into and receive information on bank accounts and other related data held by financial institutions.
“Notwithstanding any contrary provision of RA 1405, or the Bank Secrecy Law, Foreign Currency Deposit Act of the Philippines, and other general and special laws, the commissioner is hereby authorized to inquire into and receive information on the bank deposits and other related data held by financial institutions,” it said.
Under the bill, the BIR commissioner is authorized to inquire into and receive information on bank accounts and other related data held by financial institutions of a specific taxpayer upon an obligation to exchange tax information with a foreign tax authority, whether on request or automatic, pursuant to an international convention or agreement on tax matters to which the Philippines is a signatory or a party of.
However, the information obtained from the banks and other financial institutions may be used by the BIR for tax assessment, verification, audit and enforcement purposes.
It also said the exchange of information with a foreign tax authority, whether on request or automatic, shall be done in a secure manner to ensure confidentiality thereof under such rules and regulations as may be promulgated by the secretary of finance, upon recommendation of the commissioner and in accordance with international common reporting standards.
The bill added that the commissioner is also authorized to inquire into and receive information on bank accounts and other related data held by financial institutions of any taxpayer upon order of any court of competent jurisdiction in cases involving offenses covered under NIRC, subject to the rules and regulations of the DOF and BIR.
Image credits: AP/Aaron Favila