‘The new tax-amnesty law’

To allow taxpayers with unpaid tax liabilities to start with a clean slate and provide the government with an opportunity to realize uncollected tax revenues, Congress passed the tax-amnesty law (Republic Act 9480) that took effect on June 16,  2007. To implement the provisions of the new law, the Department of Finance issued Department Order 29-07 dated August 15, 2007, and Revenue Memorandum Circular  55-2007 issued by the Commissioner of the Bureau of Internal Revenue (BIR) on  August 21, 2007.

The amnesty granted under the new law is quite broad. It covers all national internal revenue taxes for taxable year 2005 and prior years, with or without assessments, which have remained unpaid as of December 31, 2005. Individuals, whether resident or nonresident citizens, or resident or nonresident aliens; estates and trusts; corporations; cooperatives and tax-exempt entities that have become taxable as of  December 31, 2005; and other juridical entities, including partnerships, may avail themselves of this tax amnesty.

Excluded from the amnesty are withholding agents, with respect to their withholding tax liabilities. Also excluded are those with cases pending upon the law’s effectivity that essentially involve unexplained or unlawfully acquired wealth, money-laundering, tax-evasion and other criminal offenses under the National Internal Revenue Code (NIRC), and other frauds, illegal exactions and transactions and malversation of public funds and property punishable under the Revised Penal Code. Tax cases that are subject of final and executory judgment by the courts are likewise beyond the coverage of the new law.

The amnesty may be availed of within the six-month period from September 6, 2007 to  March 5, 2008. Availing oneself of the amnesty is quite simple. A Notice of Availment, Statement of Assets, Liabilities and Networth (SALN) as of December 31, 2005, and Tax Amnesty Return (BIR Form 2116) must be filed with the BIR Revenue District Office/Large Taxpayer District Office having jurisdiction over the taxpayer’s principal place of business. Payment of the amnesty tax may be done through an Authorized Agent Bank using the Tax-Amnesty Payment Form (Acceptance of Payment Form) [BIR Payment Form No. 0617].

The amnesty tax rates are also quite reasonable. For individuals, trusts and estates, the amnesty tax payable is 5 percent of their total declared net worth or P50, 000, whichever is higher. For corporations, it is either 5 percent of their total declared net worth or an amount ranging from P25,000 to P500,000—whichever is higher, depending on their subscribed capital.

The taxpayer, by availing himself/herself of the amnesty, is deemed to have admitted nonpayment of all proper internal-revenue taxes, and that it is liable for such taxes. But the effect of the amnesty is such that the taxpayer becomes immune from any and all payment of taxes and the corresponding civil, criminal or administrative penalties under the NIRC for taxable year 2005 and prior years. The immunities and privileges granted by the new law, however, shall not apply to those who failed to file a SALN and the tax-amnesty return, or where the amount of the net worth as of December 31, 2005 was proven to be understated to the extent of 30 percent or more.

Other than for the purpose of determining a taxpayer’s net worth beginning January 1, 2006, the tax-amnesty returns and the SALN shall not be examined, inquired or looked into by any person or government office. The SALN and tax-amnesty returns shall not be admissible as evidence against a taxpayer in all judicial, quasijudicial or administrative proceedings that pertain to internal-revenue taxes for the years covered by the tax amnesty availed of. But the taxpayer may use the same as a defense in cases brought against him. The books of accounts and other records of the taxpayer for the years covered shall, likewise, not be examined, except for verifying the validity of a claim for any tax refund, tax credit (other than for taxes withheld on wages), tax incentives and/or exemptions under existing laws, when so authorized in writing by the BIR commissioner.

The law also provides that the grant of any future tax amnesty, including any administrative tax amnesty by the BIR, shall not be allowed. But any compromise or abatement under Section 204 of the NIRC is not included in the moratorium.

Critics of the law point out that the law requires the BIR commissioner to publish a list containing the names of all taxpayers, their gross income and amount of income taxes paid for the immediately preceding taxable year in newspapers or the BIR web site on or before May 31 following the close of each calendar year. This provision does not appear to serve any of the purposes for which the law was enacted. In fact, this runs counter to its objective of enhancing tax compliance. Beyond this, the provision raises concerns that it amounts to an encroachment on the privacy of individuals, a right that is guaranteed by the Constitution.               

On this column:

Atty. Dada G. Roxas-Rivera is a Partner, Corporate and Special Projects Department of the Villaraza & Angangco Law Offices (web site: www.cvclaw.com). Her areas of practice include commercial law, taxation, foreign investments, mergers and acquisitions, project development and real estate transactions. The law firm’s partners will write columns every other Tuesday.

NOTE: This article has been prepared for informational purposes only and should not to be treated as legal advice.

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To allow taxpayers with unpaid tax liabilities to start with a clean slate and provide the government with an opportunity to realize uncollected tax revenues, Congress passed the tax-amnesty law (Republic Act 9480) that took effect on June 16,  2007.