by Kolleen V de Guzman
“Forgiveness does not change the past but it does enlarge the future.” – Paul Lewis Boese
The season of Lent gives Christians an opportunity to open up their hearts to forgive those who have wronged them as well as to ask for forgiveness for the wrongs they have done. It is the time when Christians are given another chance to live a faithful and blissful life.
In the world of taxation, errant taxpayers are also given an opportunity to be forgiven from their tax liabilities to be able to start again with a clean slate by availing of a tax amnesty but their tax liabilities are not to be forgotten because these taxpayers still have to pay an amnesty tax, albeit lower than the regular tax rates.
The Supreme Court describes a tax amnesty as an “articulation of the absolute waiver by a sovereign of its right to collect taxes and power to impose penalties on persons or entities guilty of violating a tax law” (CS Garment, Inc. vs. Commissioner of Internal Revenue, G.R. No. 182399, March 12, 2014). However, it may be argued that the grant of tax amnesty gives the notion that the government is inefficient in its tax collection programs. It may also give a negative impact on the part of honest taxpayers who may view the tax amnesty as unfair to them since they have paid the correct amount of taxes on time. Worse, errant taxpayers may just depend on future tax amnesty grants instead of complying with tax laws.
In 2007, Republic Act (RA) No. 9480 (An Act Enhancing Revenue Administration and Collection by Granting an Amnesty on All Unpaid Internal Revenue Taxes Imposed by the National Government for Taxable Year 2005 and Prior Years) was passed.
More than a decade thereafter, it appears that another tax amnesty is being contemplated by Congress. Early this year, House Bill (HB) No. 7105 (An Act Enhancing 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) was introduced in the House of Representatives.
Basically, both RA No. 9480 and HB No. 7105 have similar provisions except for some modifications in the House Bill. For example, HB No. 7105 expressly provides for the authority of the Commissioner of Internal Revenue to inquire into and receive information on bank accounts and other related data held by financial institutions. There is also a provision in HB No. 7105 that authorizes the Commissioner of Internal Revenue to obtain on a regular basis from any person other than the person whose internal revenue tax liability is subject to audit or from different government agencies in order to ascertain the correctness of any tax return or to determine the liability of any taxpayer or to collect any such liability.
Taxpayers who wish to avail of the tax amnesty 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, and pay the applicable amnesty tax within two years from the effectivity of the implementing rules and regulations. The amnesty tax depends on whether or not an assessment was issued against the taxpayer. What is important is that the amnesty tax is much lower than the regular tax rates.
Taxpayers availing of the tax amnesty will be entitled to certain immunities and privileges. Aside from immunity from any civil, criminal or administrative penalties, the taxpayer’s Tax Amnesty Return and SALN as of 31 December 2017 shall not be admissible as evidence in any proceedings pertaining to the covered taxable year. The books of accounts and other records of the taxpayer for the years covered by the tax amnesty shall not be examined.
Both RA No. 9480 and HB No. 7105 are clear on the list of persons or cases that is not covered by the tax amnesty law: (1) withholding agents with respect to their withholding tax liabilities; (2) those with pending cases before the Presidential Commission on Good Government; (3) those with pending criminal cases filed in court for tax evasion and other criminal offenses under the Tax Code, and certain felonies under the Revised Penal Code; (4) those with cases involving violations of the Anti-Graft and Corrupt Practices Act, or the Act Defining and Penalizing the Crime of Plunder, or the Anti-Money Laundering Act; and (5) tax cases subject of final and executory judgment by the courts. In retrospect, during the effectivity of RA No. 9480, an issue arose as to whether or not creditable withholding taxes may be the subject of a tax amnesty. The BIR nevertheless settled the issue through Revenue Memorandum Circular No. 61-2014 which provides that there is no need to distinguish between final withholding taxes and creditable withholding taxes; in short, withholding taxes in general are not covered by the tax amnesty law.
The deliberation on the proposed tax amnesty law is still at its early stage and there is yet no way to determine with certainty when the law will be passed and implemented. More so, it still remains to be seen as to how many taxpayers who would be willing to have their unpaid taxes forgiven by the State in order to move forward with a clean slate. Tax amnesty may not only give errant taxpayers the chance to be forgiven of their tax liabilities, but also an opportunity to contribute to the welfare of the country by generating revenues for the government.
Kolleen V. de Guzman is a Supervisor from the Tax Group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice, Tier 1 transfer pricing practice, Tier 1 leading tax transactional firm and the 2016 National Transfer Pricing Firm of the Year in the Philippines by the International Tax Review.
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