Tax amnesty - to avail or not?
Hopefully it will be approved by President Duterte and enacted before Christmas. The amnesty covers all unpaid internal revenue taxes - for the years 2017 and prior - estate taxes, general taxes and delinquent accounts.
I do not have to go into the details of the amnesty tax provision but for purposes of comparison and based on past experiences, I would like to explore how the taxpayers will benefit from this, if ever it will be finally implemented. We will post in our Facebook (Inventor, Miranda & Associates) the details of the Tax Amnesty once it is enacted into law.
An analysis of the amnesty tax in 1974 shows, it may have benefited those who availed it because they were paying less taxes than if they have to do it without the benefit of an amnesty program. Furthermore, they will be covered by an immunity to avoid being examined. On the government side however, it was not enough to meet its revenue requirements. Since it is martial law at that time, people are still apprehensive of availing for fear that any information they may divulge may be taken against them.
Fast forward in 2007 which was offered through Republic Act (RA) 9480 which was passed into law on May 24, 2007. This covers all national internal revenue taxes for taxable year 2005 and prior years. However, those who availed of the amnesty were later discouraged especially those who were affected because the Bureau of Internal Revenue issued Memorandum Circular No. 19-2008 which provides certain exclusions. RA 9480 did not mention any exclusion, so some taxpayers availed only to be surprised that some of them were excluded when this BIR Memorandum Circular was issued.
I understand with this 2018 amnesty which will be implemented in 2019, the exclusions are already embedded as well as the privileges of an availment. The taxpayers should read carefully the provisions especially on the exclusions. On the other hand, the BIR should avoid issuing a circular which will run counter to the benefits which taxpayers are expecting especially when there are already taxpayers who availed of the program. Hopefully, it will be a win-win for both on the taxpayers' side and the government side. That is, the taxpayer will be given a chance to rectify past open cases or errors/lapses and the government to be able to reach its revenue target to finance its projects especially its "Build, Build, Build" program which will ultimately benefit everyone.
Actual experiences of many countries indicate that the immediate impact on government revenues by tax amnesties is almost always quite small (source: Andrew Young School of policy Studies August 2007). However, when these revenues are translated to immediate effect on government projects, taxpayers are encouraged more to avail of tax amnesty knowing that they are also contributing to the realization of these government projects which will ultimately benefit the public as a whole.
Tax amnesties are also resorted to by other countries due to lower tax compliance among taxpayers and decreasing tax revenues. One of the major reasons is the imposition of high official penalty rates. The problem is, once the taxpayer got behind on tax payments, it quickly accumulates to large penalties and interest charges. Maybe our government agencies should also look into penalty rates if it is equivocal enough not to discourage taxpayers to update their delayed payments at the same time not to encourage late payments, too. That way, maybe in the future we will not need tax amnesties anymore since taxpayers are given the financial capacity to update their payments by lower penalty rates.
The question whether to avail or not will depend on the situation of the taxpayers. The ultimate decision still rest with them. But definitely the rates although at a minimum of 5% is quite big (some people are expecting 2%) could prove to be still small if compared to the amount they that they have to pay in the absence of a tax amnesty. A proper evaluation is needed. But the cliche "starting a clean slate" by availing maybe overused but it expresses well the relief to the taxpayer as a result of the availment. At the same time, the government will be able to raise the financial resources needed in the realization of its different projects and planned subsidies.
(Wilma Miranda is the Managing Partner of Inventor, Miranda & Associates, CPAs and Member of the Board of Directors of KPS Outsourcing, Inc. The opinions expressed herein are the views of the writer and do not necessarily reflect the views and opinions of these institutions)
Wilma I. Miranda
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|Date:||Dec 10, 2018|
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