Written by Jose Jaffy Y. Azarraga, 7 June 2007
Almost three years from the time the tax amnesty bill was certified by the President of the Philippines as urgent in September 2004, Senate Bill No. 2479 (which substituted the original House Bill No. 2933) finally lapsed into law on May 24 when President Arroyo failed to act thereon within the thirty-day mandatory period from the date the bill was transmitted for her signature on April 23, 2007.
Republic Act No. 9480 (Tax Amnesty Law/TAL) was published on June 1, 2007 and therefore it shall take effect 15 days thereafter or on June 16, 2007. Its Implementing Rules and Regulations (IRR) which are necessary before the taxpayer can avail of the benefits of the law, are currently being drafted by the Bureau of Internal Revenue (BIR) and the Department of Finance (DoF). The Oversight Committee of Congress will also be holding public hearings for the formulation of the IRR. Once the guidelines have been approved and published, the taxpayer has six (6) months thereafter to avail of the amnesty program.
Briefly, the TAL covers all national internal revenue taxes for the taxable year 2005 and prior years, with or without assessments, which have remained unpaid as of December 31, 2005.
Except for those disqualified as discussed in the later paragraphs, the TAL offers the taxpayers the opportunity to start a clean slate as far as their tax obligations/liabilities are concerned, by filing a notice and a tax amnesty return, accompanied by a copy of their Statement of Assets, Liabilities and Networth (SALN) as of December 31, 2005 and paying the amnesty tax. The law grants the taxpayers immunity from payment of unpaid taxes and penalties for calendar year ending December 31, 2005 and prior years upon payment of the amnesty tax.
The amnesty tax is basically 5 percent of the net worth of the taxpayer based on his SALN but not lower than the minimum amount set in the law depending on the kind of taxpayer and the amount of subscribed capital (for corporations).
The TAL also allows taxpayers who filed their balance sheets/SALN together with their 2005 tax returns to amend these documents by disclosing previously undeclared assets and liabilities and paying an amnesty tax equal to 5 percent based on the resulting increase in net worth or the minimum amount as provided by the law.
However, taxpayers who availed of the tax amnesty and understated their net worth by 30 percent or more, and those who fail to declare any property may be criminally prosecuted for tax evasion.
But if properly availed, returns filed under the program cannot be used against the taxpayer in any proceeding involving internal revenue taxes. In addition, the taxpayer’s books of accounts and other records for the period covered by the tax amnesty will be exempted from examination, unless otherwise authorized by the BIR commissioner for purposes of verifying claims for tax refunds, tax credits, tax incentives, or exemptions.
Disqualified from availment of the tax amnesty program are:
- withholding agents with respect to their withholding tax liabilities
- pending tax cases falling under the jurisdiction of the Presidential Commission on Good Government (PCGG)
- tax cases involving ill-gotten or unexplained wealth, graft, corruption, money-laundering activities, tax evasion, other criminal offenses, and fraud
- as well as tax cases which are already subject to final and executory judgment.
The new measure has become the subject of considerable controversy for being considered a two-edged sword. Those in favour justify the measure as providing an opportunity for taxpayers to start a clean slate and for the BIR to widen its tax base. However, those contrary thereto lament its laxity in dealing with tax delinquents, to the detriment of compliant taxpayers, by granting immunity to those with pending assessments upon mere payment of the 5% tax on increased net worth or the minimum prescribed amount.
From the perspective of the tax authority, the measure is feared to generate a huge shortfall in collections if the taxpayers, instead of paying their assessments, will avail instead, of the amnesty program.
Thus, the TAL seems to effectively contradict the BIR’s “New Paradigm Shift” in the collection of taxes as embodied under Revenue Memorandum Circular (RMC) No. 32-2007 (which was recently featured in this column, May 10, 2007 issue entitled, ”
BIR gone haywire”).
While the RMC calls for a speedy and summary resolution of all pending tax assessment cases in order to bring it to the payment stage and intensified filing of tax evasion/tax fraud cases and increased availment of the twin administrative compromise programs (OTAP and IVAP), the TAL offers a minimum amount of amnesty tax to be paid to the government in exchange for complete immunity from audit and suit.
Thus, for many taxpayers, the TAL would be a welcome option they can ponder on in light of the intensified audit and collection campaign that the BIR has launched under its New Paradigm Shift program. On the part of the BIR, one can only speculate how it would implement the TAL without adversely affecting or undermining its collection efforts under RMC 32-2007.
