Delinquents covered by tax amnesty
EUNEY MARIE J. MATA-PEREZ
The current tax amnesty bill proposed by the Department of Finance (DOF) deals with an estate and a general tax amnesty (GTA) in separate parts, as well as with an unprecedented tax amnesty on delinque ncies.
The first part of the proposed bill is the estate tax amnesty which requires the payment of a six percent estate tax amnesty tax (without interest and penalties) of the decedent’s undeclared estate valued at the time of death. It applies to estate taxes due for taxable year 2017 and prior years, similar to the estate tax amnesty originally proposed under House Bill No. 4814.
The second part is the GTA, which covers all internal revenue taxes (excluding VAT and excise tax collected by the BOC, and estate taxes) for the taxable year 2016 and prior years. It can be availed of by paying an amnesty tax at rates ranging from four percent to five percent of a taxpayer’s total assets, and the filing of a general tax amnesty tax return, together with a notarized Statement of Assets (SAs) as of December 31, 2016. Lower tax amnesty rates can be availed of by early filers.
The basis for the general amnesty tax — whether based solely on assets or net worth — is the major pending issue of the amnesty proposal. In DOF’s proposal, the amnesty tax is based on “assets”. This asset-based method is favored for simplicity.
However, using assets as basis may not necessarily reflect the unreported “income” or inflow of wealth to the taxpayer. It’s the taxpayer’s “net worth” increases which show any unreported income. Thus, previous amnesty bills consider net worth or increases in net worth or revenues of the taxpayer.
For instance, Senate Bill No. 1494 requires the payment of the amnesty tax equivalent to five percent of the increase of the taxpayer’s net worth or 20 percent of the increase in its gross revenues, whichever is higher.
On the other hand, House Bill No. 7104 introduced in the House of Representatives proposed an amnesty tax of eight percent or four percent of the taxpayer’s net worth or increase in net worth. The amnesty tax under RA No. 9480, the last amnesty law passed in 2007, was also based on increase in net worth.
In any case, the interesting and the welcome addition in the proposal is the amnesty on delinquencies or final assessments. This amnesty requires the payment of the basic tax (only), at the following rates:
(a) 50 percent of the basic tax, for delinquencies and assessments which have become final and for tax cases subject of final and executory judgment, and
(b) 80 percent of the basic tax, for those with pending criminal cases with the DOJ or other courts.
Previous amnesty programs have always excluded assessments which have become final and executory or so-called delinquent accounts. A delinquency technically occurs when a taxpayer fails to pay the tax within the periods demanded by the BIR. After the lapse of such period, the taxpayer no longer has any judicial remedy or option to appeal. It would mean the assessment has become due, final and demandable.
Also, at that point, huge amounts of interests and surcharges would have been included in the BIR’s demand.
The amnesty on delinquencies will afford taxpayers an option to pay much lower amount, as it’s based on a percentage of “basic” tax only.
It may be some time before another tax amnesty program will be offered again by the government. The last general amnesty we had was more than 10 years ago under RA No. 9480 in 2007. Thus, availment of this proposed tax amnesty program is a good opportunity for taxpayers to clean up their past tax liabilities.
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