Installments possible for tax amnesty

By JUDY T. GULANE, BusinessWorld Senior Reporter Staggered amnesty tax payments are being contemplated to entice taxpayers who may feel the 5% rate in the just-ratified measure is too high. Quezon Rep. Danilo E. Suarez, one of the main authors of the amnesty bill and chairman of the House oversight committee, said that while the measure is silent on installment payments, its implementing rules and regulations can provide for such a schedule. Finance and tax bureau officials as well as representatives of business associations, during an oversight committee hearing on Monday, said they had no objections to graduated payments. The tax amnesty bill, ratified by both houses of Congress before the legislature adjourned last month, forgives taxpayers who have been delinquent with their 2005 and prior years’ taxes as long as they pay an amnesty tax, file an amnesty return and submit a statement of assets, liabilities and net worth (SALN) as of December 31, 2005. Individuals must pay an amnesty tax of P50,000 or 5% of their net worth as of December 31, 2005, whichever is higher. Corporations, depending on their subscribed capital, must pay a tax ranging from P25,000-500,000 or 5% of their net worth, whichever is higher. Others, such as cooperatives and foundations, are subject to a tax of P50,000 or 5% of their net worth, whichever is higher. The amnesty will be open for six months after its implementing rules and regulations are approved. The Finance secretary and the tax commissioner are to draft the rules and regulations. The bill also provides that an Information Management Program be established by the Finance department, the tax bureau and other government agencies, to extract the data from the amnesty returns and SALNs and expand the tax bureau’s database. The bill is awaiting the signature of President Gloria Macapagal Arroyo before it becomes a law. Mr. Suarez said the House had wanted an amnesty rate of 3%, but even this was quite high considering that the Federation of Filipino-Chinese Chambers of Commerce and Industry (FCCCI) preferred a 1% to 2% rate. He noted that senators had refused to discuss the bill in bicameral conference, forcing congressmen to adopt their version, which raised the 3% amnesty rate to 5%. He also stressed that few takers would defeat the purpose of expanding the tax bureau’s database. Chris Zafra, Finance legal officer, said the tax amnesty bill "does not foreclose graduated payments" but anticipated a problem with defaults on due dates. Rogaciano Buenviaje, Finance research officer, said the bill provides leeway for staggered payments. Section 2 and 7 state that the amnesty tax must be paid and the amnesty return filed "within six months from the effectivity of the [implementing rules and regulations]." Internal Revenue Commissioner Jose Mario C. Buñag said he sees no problem with amnesty paid in tranches, but cited the need to draw up a viable payments scale. He added that scheduling the payment of amnesty taxes is not new. The amnesty covering unpaid income taxes as of 1981 to 1985 - ordered by former President Corazon C. Aquino via Executive Order 41 - came with a schedule of payments depending on the amount of the amnesty tax. A P50,000 or less tax was to be paid in a lump sum no later than October 31, 1986, while taxes higher than P50,000 but not more than P500,000 could be paid in two equal installments, with due dates falling on October 31 and November 30, 1986. Taxes higher than P500,000 could be paid in three equal installments, with deadlines set on October 31, November 30 and December 31, 1986. The presidential order meted a 25% surcharge on the unpaid amount when an installment was not paid on time. Francisco Nerida, representing the FCCCI; Lyn Olivo, representing the Philippine Retailers Association; and Noel Domingo, representing the Philippine Chamber of Commerce and Industry at the hearing on Monday said they welcome the idea of graduated payment of the amnesty tax but would like to see a schedule first. "In principle it is acceptable, but it will still depend on the gradation," Mr. Nerida said. Mr. Suarez asked Mr. Buñag to come up with a schedule of payment to be presented next week.