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Tax amnesty will allay the fears of PIPC victims

(Article published in the Oct. 3, 2007 issue of Manila Standard Today)  

Another common post-scam weapon used by fraud perpetrators is fear of attracting the attention of the tax authorities.  In addition to sowing among the victims the feeling of pessimism, if not despair, at the prospects of recovering their money, fraudsters and their conspirators, accomplices and accessories tell the victims that complaining to the authorities will put them in trouble with the taxman.  Surely, the scammers warn their victims, coming out in the open will precipitate scrutiny of their tax liabilities by the Bureau of Internal Revenue, thereby giving them more problem than they already have.  Silence is thus presented as the better part of discretion.

 The last two issues in September of this column tried to advise the victims of Performance Investment Products Corporation (PIPC) and its local arm the PIPC Corp. not to fall for the scammers’ message of futility in chasing their funds; contrary to what they are being made to believe, they in fact do have a fighting chance of recovering the money stolen from them, thanks to long established principles of trust and the helping hand of the Anti-Money Laundering Council.  In this issue, Sheer Luck Holmes wants to show a quick and easy antidote to the psuedo fear that their speaking out will invite unwanted BIR intrusion into their affairs.  That neutralizer is R.A. No. 9480, or the Tax Amnesty Act of 2007.

 For some strange reason, perhaps it is due to the tendency of the human eye to focus on small ink stain at the center rather than on the rest of an otherwise immaculately white piece of cloth, many taxpayers who have attended briefing sessions conducted by accounting firms on R.A. No. 9480, leave the seminars unconvinced of the benefits of the tax amnesty offered by the law.  Whatever may be those aspects of R.A. No. 9480 that the accountants are unhappy about, the fact is, says Sheer Luck, the law is perfectly designed to allay the fears of PIPC victims.


  PIPC victims are made to be afraid that the BIR would ask two embarrassing questions: first, how come they had so much money to invest in PIPC’s “products”? and second, had they reported in their income tax returns the “interest” paid to them by PIPC, if any.

 The target market of PIPC was a special section of Philippine society. Many of the victims were those who earned their money from businesses which do not require permanent establishments because success depends more on their contacts and network rather than in having a fixed place or puesto.  Others are in businesses which the government finds difficult to license or regulate.  And still some had money simply because they were given cash by their parents or relatives.  Many of them, accordingly, did not pay the proper taxes on their accumulation or acquisition of the funds invested with PIPC.

 Those who were lucky enough to receive some interest from PIPC also most likely did not report what they received in their income tax returns.  They were promised by PIPC that their earnings will be deposited into their dollar bank accounts within seven (7) days from the maturity of their placements.  Since their bank accounts are protected by the laws on bank secrecy, most of the victims may have sincerely thought that they really did not have to pay taxes on what PIPC might have paid to them. 

 Because of these two skeletons in their closets,  PIPC’s victims are easily cajoled into keeping quiet.  But actually, PIPC victims can buy their tax peace on the investments stolen from them, and more, by simply availing themselves of the tax amnesty offered by R.A. No. 9480. The tax amnesty covers all internal revenue taxes imposed by the National Government for the taxable year 2005 and prior years.  These are the  income tax,  estate  and donor’s taxes, value  added tax,  other percentage taxes,  excise  taxes, documentary  stamp taxes, improperly  accumulated earnings  tax,   except  withholding  taxes. 

 Hence, the PIPC victims are not given just the chance  to clear themselves of all the income tax liability that might have been due and unpaid both on the accumulated or acquired capital that was invested in PIPC and the earning, if any, that they might have from PIPC.  They are also able to free themselves from liability for other internal revenue taxes which may not even be related to their investment or its income, if any.

 Just exactly what benefits will be granted to the PIPC victim, as well as any other person, who, by fully complying with the conditions of the law, avails himself of the tax amnesty offered by R.A. No. 9480?  In general, as the Greek root of the word suggests (amnestos meaning not remembered), the BIR will forget the taxpayer’s liability, not just for taxes due on the investments lost, but, as previously stated, for  all internal revenue taxes imposed by the National Government for the taxable year 2005 and prior years.

 This “forgetting” consists in three major immunities and privileges granted to the complying taxpayer.  First, the taxpayer will be immune from the payment of taxes, as well as additions thereto, and the appurtenant civil, criminal or administrative penalties under the National Internal Revenue Code of 1997, as amended, arising from the failure to pay any and all internal revenue taxes for taxable year 2005 and prior years.

 Second, the taxpayer’s Tax Amnesty Return and the Statement of Assets, Liabilities and Networth as of December 31, 2005 shall not be admissible as evidence in all proceedings that pertain to taxable year 2005 and prior years insofar as such proceedings relate to internal revenue taxes, before judicial, quasi-judicial or administrative bodies in which he is a defendant or respondent.  They cannot be examined, inquired or looked into by any person or government office, except for the purpose of ascertaining the networth beginning January 1, 2006. But while the Tax Amnesty Return and the Statement of Assets, Liabilities and Networth may not be used against the availing taxpayer, they may be used for taxpayer himself as part of his defense, whenever appropriate, in cases brought against him.

 And third, the books of accounts and other records of the taxpayer for the years covered by the tax amnesty availed of cannot not be examined, except in cases authorized in writing by the Commissioner of Internal Revenue to verify the validity or correctness of a claim for any tax refund, tax credit (other than refund or credit of taxes withheld on wages), tax incentives, and/or exemptions under existing laws.

 In exchange for these immunities and privileges, all that the PIPC victim, or any availing taxpayer for that matter, has to do is (a) file three forms, namely, a Notice of Availment, his Statement of Assets, Liabilities and Networth as of December 31, 2005, his Tax Amnesty Return; and (b) pay the amnesty tax equivalent to five percent (5%) of his total declared networth in his said statement of assets, liabilities and networth, or the increase therein over a previously filed one.  A minimum of Php 50,000, however, is required of individual taxpayers; corporations are subject to miniums depending on their subscribed capital.

 The period to avail oneself of the tax amnesty is only up to March 6, 2008;  so if the PIPC victim has become any wiser from his or her recent experience, he would do well to go consult his lawyer and account right away.