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Forgiving and forgetting

(Article published in the Oct. 10, 2007 issue of Manila Standard Today)  

            The current tax amnesty law was controversial right from the very beginning.  Although part of the program articulated by still President Gloria Macapagal Arroyo in her State of the Nation Address in 2004, it was quickly dropped from the administration’s list of priority legislation. 

Finance Secretary Margarito Teves was reported to have told the legislators that the Executive was “lukewarm” to the proposal and was said to have written a memo saying that “A tax amnesty as a fiscal policy tool should be considered with extreme caution because it is generally perceived to be indicative of a weak tax administration and enforcement system. It is also perceived as rewarding tax cheats and reinforcing their behavior, while ‘penalizing’ compliant taxpayers for their good tax ethics.”

Still, after what House Bill No. 2933 father Danilo Suarez called “almost 9 years of hard work” (Yes, Virginia, they do hard work in Congress), R.A. No. 9480 is in place, complete with Implementing Order No. 29-07 issued by the Department of Finance on 15 August 2007, the exact last day fixed by the law for the issuance of implementing rules.

By the middle of this month, two months of the six month availment period which ends of 06 March 2008 shall have passed, and, despite many information seminars conducted nationwide by our tax authorities, still the expected queues of amnesty applicants at the BIR’s offices have not formed. 



 Apparently because Department of Finance seems to still bear its grudge against the idea of a tax amnesty.  This the taxpayers read from the tenor of DOF Order No. 29-07 itself. An example is the obvious conflicting thrusts of Section 2 of Rule 1 and Section 8 in Rule IV of DOF Order No. 29-07.

 Section 2 of Rule I which states the rule of construction to follow should there arise a conflict or ambiguity.   “These Rules” says Section 2, “shall be construed and applied in accordance with and in furtherance of the policies and objectives of R.A. 9480.”  Sure, but what are those “policies and objectives”?

 In typical Gary Teves non-passion, nowhere in the order does he say what those “policies and objectives of R.A, No. 9480” are.  As he left it to his father to justify why our class topnotcher, Jose Mario Buñag, had to be sacked from his post as Commissioner of the BIR, he leaves it to others to say what the law primarily wanted to achieve.

 Thus, taxpayers have had to look to House Speaker Jose De Venecia, who is as credible as his son Joey, to say that the idea of the law was not to make taxpayers “back off!”.  On the contrary, the Speaker explains, “By bringing in a large number of errant taxpayers into the fold of national taxation, the tax amnesty program will result in a broader and updated tax base and future noncompliance will also be proportionately reduced.”  Consequently, the purpose is not so much to collect additional money this year by way of the amnesty tax; instead, it is to include in the tax net as many as possible, that is what is meant by “ a broader and updated tax base”, and thereby enhance tax collection in subsequent years.

 Section 2’s thrust of inclusion, however, is contradicted by exclusionary impact of Section. 8 in Rule IV.  Section 8 talks about the Statement of Assets, Liabilities and Net Worth (SALN) that a taxpayer availing himself of the offered amnesty must file together with his Notice of Availment and Tax Amnesty Return.  The SALN is central to R.A. No. 9480 because it will serve as the beginning balance in the computation (and consequent taxation) of future increases in the taxpayer’s net worth.

 The law itself was very lax about what ought to be stated in the SALN. Section 3 of the law simply requires that the SALN must declare (a) All assets within or without the Philippines, whether real or personal, tangible or intangible, whether or not used in trade or business; (b) all existing liabilities which are legitimate and enforceable, secured or unsecured, whether or not incurred in trade or business; and, (c) the networth of the taxpayer, which shall be the difference between the total assets and total liabilities. The message of Section 3 is clear: what needs to be declared is simply a general listing. 

 In contrast to this lenient attitude of Section 3 of the law, Section 8 of the DOF has this to say with respect to assets.  Real properties are to be accompanied by a description of their classification, exact location, and valued at acquisition cost, if acquired by purchase or the zonal valuation or fair market value, whichever is higher, if acquired through inheritance or donation.

 Furthermore, personal properties (other than money), are to be accompanied by description and kind and number of assets (i.e. automobiles, shares of stock, etc.) or other investments, indicating the acquisition cost less depreciation or amortization, in proper cases, if acquired by purchase, or the fair market price or value at the time of receipt, if acquired through inheritance or donation. Other rules follow, concerning assets denominated in foreign currency, cash on hand and in bank.

 On the other side of the SALN will be listed all liabilities which are legitimate and enforceable, secured or unsecured, whether or not incurred in trade or business, disclosing or indicating clearly the name and address of the creditor and the amount of the corresponding liability.

 The amount of details expected by Section 8 of the DOF Order to be declared in the SALN is obviously a complete turn-off.  How many people whose claim to ownership is only tax declarations can tell where exactly their lands are? Except for those in business, how many owners can remember how much they bought their cars for?  People thus are tempted to turn away.  Taxpayers simply lose their appetite for the amnesty once told of the minutiae required in the SALN. Instead of inclusion, the likely result is exclusion.

 Lack of space prevents identification of other aspects of Department Order No. 29-07 that contravene the spirit of the amnesty offered in R.A. No. 9480.  What is clear, though, is that a paradigm shift has to occur in the way the Department of Finance looks at the law.  The lawmaking body has already made plain what it wants, a general forgiveness and a new start for  all.  The executive, whether it likes it or not, must not implement the law in a manner that sabotages its intent.

 In the case of the SALN, for instance, all that is required by way of detail to achieve its purpose is, I submit, what is required under the Anti-Graft and Corrupt Practices Act. Both laws have the same purpose, to catch, looking forward, illegal acquisitions. In this connection, it would be interesting to see how much detail Secretary Teves and his superior, still President Gloria Macapagal Arroyo put in their annual statement of assets and liabilities. 

           The tax authorities must forgive and forget, and, except for those persons and cases explicitly excluded by the law, welcome everyone to the fold.  In a true tax amnesty, no one is considered as a cheat.