See - https://www.manilatimes.net/2019/10/03/opinion/columnists/the-tax-amnesty-solution/625397/
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The tax amnesty solution
By JOEL L. TAN-TORRESOCTOBER 03, 2019
JOEL L. TAN-TORRE
First of two parts
First of two parts
TO avail or not? That is the question confronting taxpayers, both individual and corporate, on whether to rely on the recently enacted Tax Amnesty Act to find closure to their tax problems and woes.
Let us do a fast rewind. Last February 2019, taxpayers received a hearty Valentine’s gift from Congress and President Duterte. Republic Act (RA) 11213: the long-awaited tax amnesty (TA) under Package 1B of the Duterte administration’s Comprehensive Tax Reform Program was finally signed into law.
The Tax Amnesty Act offers taxpayers the opportunity to be forgiven of their past lapses in meeting their tax obligations, and eventually settle these liabilities affordably. As a complement to Tax Reform for Acceleration and Inclusion Law, the Tax Amnesty Act is expected to ramp-up revenue collections of the government to meet its priority infrastructural and socio-economic agenda. An amnesty may be construed as a relaxation of some stringent tax rules, but it is indicative that more aggressive tax enforcement efforts are forthcoming.
In the journey of the passage into law of the Tax Amnesty Act, there were deletions of some provisions contained in the version of the law sent by Congress to Malacañang for approval. In a veto letter dated Feb. 22, 2019, the President said the General Tax Amnesty (GTA) provisions were being vetoed because of a lack of safeguards against tax evasion. The President said: “I believe that, ultimately, the original objective will not be met under the proposed framework. Without the provisions breaking down the walls of bank secrecy, setting the legal information for tax purposes, and safeguarding against those who abuse the amnesty by declaring an untruthful asset or net worth, a general amnesty that is overgenerous and unregulated would create an environment ripe for future tax evasion, the very thing we wish to address.”
In his veto message, the President also indicated, “The general amnesty program is meant to give taxpayers a fresh start as well as to signal the start of a fair tax enforcement campaign by the tax authorities. It is not meant to be abused for the gain of the few and the loss of the rest of the citizenry. These safeguards against tax evasion are estimated to contribute P76.6 billion to the public funds in the next five years which we hope to use to better our infrastructure and services.” It is to be noted that with the presidential veto of the GTA, the tax revenues estimated from the tax amnesty amounts to a lower P27.5 billion.
With the veto of the GTA provisions, what were left in the Tax Amnesty Law were the TA on delinquent accounts and the estate tax.
The veto letter came out with this insightful message: “More than the much welcomed revenue to be generated by this law, the amnesty is about rebuilding trust between the government and the people — an opportunity for citizens to disclose past failings and for the government to forgive them with the expectation of better compliance in the future.”
If and how these noble intentions will be attained remain to be seen.
TA on delinquent accounts
Let us do a fast rewind. Last February 2019, taxpayers received a hearty Valentine’s gift from Congress and President Duterte. Republic Act (RA) 11213: the long-awaited tax amnesty (TA) under Package 1B of the Duterte administration’s Comprehensive Tax Reform Program was finally signed into law.
The Tax Amnesty Act offers taxpayers the opportunity to be forgiven of their past lapses in meeting their tax obligations, and eventually settle these liabilities affordably. As a complement to Tax Reform for Acceleration and Inclusion Law, the Tax Amnesty Act is expected to ramp-up revenue collections of the government to meet its priority infrastructural and socio-economic agenda. An amnesty may be construed as a relaxation of some stringent tax rules, but it is indicative that more aggressive tax enforcement efforts are forthcoming.
In the journey of the passage into law of the Tax Amnesty Act, there were deletions of some provisions contained in the version of the law sent by Congress to Malacañang for approval. In a veto letter dated Feb. 22, 2019, the President said the General Tax Amnesty (GTA) provisions were being vetoed because of a lack of safeguards against tax evasion. The President said: “I believe that, ultimately, the original objective will not be met under the proposed framework. Without the provisions breaking down the walls of bank secrecy, setting the legal information for tax purposes, and safeguarding against those who abuse the amnesty by declaring an untruthful asset or net worth, a general amnesty that is overgenerous and unregulated would create an environment ripe for future tax evasion, the very thing we wish to address.”
In his veto message, the President also indicated, “The general amnesty program is meant to give taxpayers a fresh start as well as to signal the start of a fair tax enforcement campaign by the tax authorities. It is not meant to be abused for the gain of the few and the loss of the rest of the citizenry. These safeguards against tax evasion are estimated to contribute P76.6 billion to the public funds in the next five years which we hope to use to better our infrastructure and services.” It is to be noted that with the presidential veto of the GTA, the tax revenues estimated from the tax amnesty amounts to a lower P27.5 billion.
With the veto of the GTA provisions, what were left in the Tax Amnesty Law were the TA on delinquent accounts and the estate tax.
The veto letter came out with this insightful message: “More than the much welcomed revenue to be generated by this law, the amnesty is about rebuilding trust between the government and the people — an opportunity for citizens to disclose past failings and for the government to forgive them with the expectation of better compliance in the future.”
If and how these noble intentions will be attained remain to be seen.
TA on delinquent accounts
With the presidential veto of the General Tax Amnesty provisions, the TA on delinquent accounts and estate tax remained in RA 11213.
The TA on delinquent accounts provide a relief for those taxpayers who have unresolved tax cases pending collection proceedings in the Bureau of Internal Revenue (BIR) or unsettled in the judicial courts or Department of Justice (DoJ). This also covers situations where taxpayers failed to remit to the BIR taxes that they previously withheld from suppliers or employees. Several issuances have been promulgated by the Department of Finance and the BIR for this TA, including Revenue Regulations 4-2018, Revenue Memorandum Circulars 23-2019 and 57-2019. It is expected that additional guidelines will still be issued.
This TA covers all national internal revenue taxes for taxable year 2017 and prior years. I like to categorize the different situations covered in the TA into two. The first category consists of where the BIR has issued final assessment notices (FAN) or final decision on disputed assessments (FDDA), which have become final and executory since the taxpayer failed to contest these, administratively or judicially, within the prescribed time period. The BIR considers these as being delinquent accounts and included in its inventory of arrears accounts that amount to over P300 billion to date. The second category includes all other cases that may not have FAN or FDDA becoming final and executory but are considered delinquent under the guidelines. These include criminal cases pending with the DoJ or prosecutor’s office or the courts for tax evasion and other criminal offenses; cases with final and executory judgment by the courts; and withholding tax liabilities of withholding agents arising from their failure to remit withheld taxes.
Those availing of the TA on delinquent accounts have until one year from the effectivity of the rules or April 23, 2020 to complete the payment of the amnesty tax and submit all documentary requirements. The guidelines issued by the BIR and the Tax Amnesty Return (“TAR”) or BIR Form 2118-DA contain the details of the documentary and procedural requirements.
The first requirement for the first category of tax delinquencies is to secure a certificate of tax delinquencies (CTD) from the BIR office concerned. The BIR is mandated to submit the CTD to the taxpayer who requests the same within the day of application. The requirements for the second category of TA case are different as prescribed in the guidelines,
The TAR and the acceptance payment form (APF) or BIR Form 0621-DA can be accomplished without too much difficulty. The TA rates for the different cases are the following:
– 40 percent of basic tax for delinquent accounts in the first category;
– 50 percent of basic tax for tax cases subject of final and executory judgment by the courts;
– 60 percent of the basic tax for criminal cases pending with the DoJ/prosecutor’s office or the courts; and
– 100 percent of the basic tax for unremitted withholding taxes.
Once the TAR and APF are accomplished, these are to be submitted to the BIR office concerned. The BIR will review and endorse these back to the taxpayer, with the APF bearing the signature of the authorized BIR officer.
The taxpayer can now proceed with the payment of the amnesty tax to the authorized accredited agent bank or revenue collection office (RCO) by merely presenting the APF. There is no need to present the TAR or any supporting document to the bank or RCO. Instead, all of the documents, including the TAR, bank-validated APF and supporting documents should be filed in triplicate with the BIR office concerned after the payment. Taxpayer will be given the received copy of all of these documents,
Within 15 calendar days from the submission to the BIR, the authority to cancel (ATCA) will be issued by the BIR to the taxpayer. The ATCA will be the basis for the closure of the cases of taxpayers with delinquent accounts. Thereafter, the taxpayer can finally relax knowing that his tax cases are finally settled and henceforth “start clean” with the BIR moving forward.
TA on estate tax
One of the common tax problems that my clients, relatives and friends present to me is how to resolve their long-pending estate tax issues. Most of them have been unable to transfer to the rightful heirs the properties left by their ancestors since the required estate tax payments and clearances have not been completed after so many years since the decedent’s death. Consequently, they have not been able to put to maximum productive use these properties due to constraints of the unsettled estate tax and ownership issues.
With the passage of RA 11313 providing for a tax amnesty on estate tax, is the resolution of this problem forthcoming? This TA provides for the settlement of the tax obligations of estates of decedents who died on or before Dec. 31, 2017, with the payment of TA of 6 percent of the estate value. There are no interest or other penalties on late payment of these estate taxes for those availing of the tax amnesty. This can result in a hefty amount, especially for those estate tax cases which were supposed to have been payable for a long time already. It is to be noted that for estates of decedents who died after Dec. 31, 2017, the estate tax provisions under the Tax Reform for Acceleration and Inclusion law will apply, including the 6 percent estate tax rate similar to the TA estate tax rate
The TA on estate tax provides a relief for the administrators of and heirs to estates who have not been able to pay the estate taxes on properties left by decedents. Several issuances have been promulgated by the Department of Finance and the BIR for this TA, including Revenue Regulations (RR) 6-2018, Revenue Memorandum Order 33-2019, and Revenue Memorandum Circular 68-2019. It is expected that additional guidelines will be issued on this in the near future.
(To be continued tomorrow)
Joel L. Tan-Torre is a Certified Public Accountant who placed No. 1 in the May 1979 CPA board examinations. He was the BIR commissioner from 2009 to 2010 and chairman of the Professional Regulatory Board of Accountancy from 2014 to August 2018. He is a partner of Reyes Tacandong & Co. He completed his International Tax Program at the Harvard Law School in 1988.
With the passage of RA 11313 providing for a tax amnesty on estate tax, is the resolution of this problem forthcoming? This TA provides for the settlement of the tax obligations of estates of decedents who died on or before Dec. 31, 2017, with the payment of TA of 6 percent of the estate value. There are no interest or other penalties on late payment of these estate taxes for those availing of the tax amnesty. This can result in a hefty amount, especially for those estate tax cases which were supposed to have been payable for a long time already. It is to be noted that for estates of decedents who died after Dec. 31, 2017, the estate tax provisions under the Tax Reform for Acceleration and Inclusion law will apply, including the 6 percent estate tax rate similar to the TA estate tax rate
The TA on estate tax provides a relief for the administrators of and heirs to estates who have not been able to pay the estate taxes on properties left by decedents. Several issuances have been promulgated by the Department of Finance and the BIR for this TA, including Revenue Regulations (RR) 6-2018, Revenue Memorandum Order 33-2019, and Revenue Memorandum Circular 68-2019. It is expected that additional guidelines will be issued on this in the near future.
(To be continued tomorrow)
Joel L. Tan-Torre is a Certified Public Accountant who placed No. 1 in the May 1979 CPA board examinations. He was the BIR commissioner from 2009 to 2010 and chairman of the Professional Regulatory Board of Accountancy from 2014 to August 2018. He is a partner of Reyes Tacandong & Co. He completed his International Tax Program at the Harvard Law School in 1988.
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