The House of Representatives Committee on Ways and Means has passed a consolidated version of House Bills 191 and 3671, which grants a general tax amnesty of one year on all unpaid national internal revenue taxes.
Albay Rep. Jose Ma. Clemente Sarte Salceda, committee chairman, said the amnesty will cover delinquent income, withholding, capital gains, donor’s, value-added, percentage, excise and documentary stamp taxes that the Bureau of Internal Revenue and Bureau of Customs failed to collected for taxable year 2018 and prior years.
The amnesty tax payment shall be based on 3 percent of equity in the taxpayer’s Statement of Assets, Liability and Net Worth as of end 2018.
The consolidated version of the tax amnesty bills also contains stronger anti-fraud measures following President Rodrigo Duterte’s request that there be a lifting of bank secrecy for fraud cases, provision for the automatic exchange of information (AEOI); and safeguards to ensure that asset or net worth declarations are truthful.
“The general tax amnesty bill addresses the President’s concerns and also complies with international standards for financial accountability. 2020 will be a year of reforms to make the financial system more accountable and more transparent, so that we can join the community of nations with credible financial institutions. We want this year to be the beginning of the end for fraud and tax evasion. My office and the Committee on Ways and Means are determined to play leading roles in getting these urgent reforms done,” Salceda said.
Earlier, the President signed the Tax Amnesty Act on Feb. 14, 2019, granting Estate Tax Amnesty and Tax Amnesty on Delinquencies but vetoed Title III, or the General Tax Amnesty by virtue of Republic Act Number 11213. The president vetoed the General Tax Amnesty Act until the Congress provided for a lifting of bank secrecy for fraud cases, AEOI, and safeguards to ensure truthful net worth and asset declarations.
“There is not such thing as free amnesty. Accountability is demanded in exchange for the general tax amnesty. The State cannot forgive without conditions. An unconditional amnesty would be free money to confessed tax evaders, who will avail of the privilege,” Salceda said.
“We are granting the President’s request and then some: we are introducing provisions to ensure that availing taxpayers are compliant with the Foreign Account Tax Compliance Act (FATCA). This is to ensure that our banking system is not declared a pariah in the international community, with risks to our OFWs and foreign investors,” Salceda said.
FATCA compels foreign financial institutions, in this case including the Philippine banks, to report U.S. financial asset holders to the IRS beginning in 2014. These institutions include banks, insurance and real estate companies, hedge funds, mutual funds, private equity firms and professionals of the financial sector. Failure to comply with the FATCA places the FFI at risk of a punitive withholding tax that may far outweigh the cost of any single foreign account. US banks may also refuse to transact with Philippine banks who are non-compliant with FATCA as they too could face steep fines and penalties, including the inability to transact internationally.
“By trying to comply with FATCA, we demonstrate to the world’s financial institutions that we can be trusted, that we are not trying to skirt around internationally-accepted norms, and that we do not condone fraud,” Salceda stressed.