Checks sought on tax compromise deals

Lawmakers constituting the Congressional Oversight Committee on Comprehensive Tax Reform Program are studying possible changes to the National Internal Revenue Code (NIRC) to control the Internal Revenue commissioner’s power to strike compromise deals with delinquent taxpayers. House of Representatives ways and means committee senior vice-chairman Rep. Herminio G. Teves of Negros Oriental noted that, currently, the NIRC does not provide "a hard and fast rule on how the commissioner should conduct such compromise." In the interest of transparency, Mr. Teves suggested that details of every compromise deal be included in a report submitted to the Finance department and the President, and for that report to be published as well. He said such deals should cover only exclusion of penalties and surcharges for late tax payments, and for cases wherein over 50% of the basic assessed amount is to be paid. The law now requires compromise amounts to be at least 10% of the unpaid amount if a taxpayer is found to be financially incapable of paying, or 40% the basic unpaid assessed amount, otherwise. Senator Edgardo J. Angara proposed for the Finance secretary to publicize every compromise deal struck wherein the basic tax involved is above P5 million. "This will be a good precaution," he said. Even as he described Internal Revenue Commissioner Jose Mario C. Buñag as "a good public servant," he stressed the need to institutionalize safeguards. The oversight body recently questioned Mr. Buñag’s decision to strike a P1.7-billion compromise deal with the Philippine Deposit Insurance Corp. (PDIC), even as the staterun deposit insurer owed the Bureau of Internal Revenue (BIR) P7 billion, including penalties and surcharges. The amount covers value-added tax liabilities from 1999 to 2004, from which PDIC argues it is exempted. Senator Sergio R. Osmeña III, on the other hand, proposed the outright scrapping of the commissioner’s power to enter into compromises. "I have always been against that old provision [Section 204 of the NIRC]. It’s a money-maker for the tax collector," he said, adding that it provided a "big loophole" for avoiding tax payments since the compromise would whittle the original tax amount anyway. House ways and means committee chairman Rep. Jesli A. Lapus of Tarlac, however, said the law was good as it is. "If the Executive is not given flexibility, there will be hardly any movement in [resolving] receivables," he argued. House ways and means vice-chairman Rep. Exequiel B. Javier of Antique said there were already enough safeguards in the law. He cited the need for concurrence of the four deputy commissioners in cases where the basic tax involved is above P1 million. He added that since PDIC is a government corporation, there was no government loss if tax was not paid. "No one benefited anyway; there was no damage done. It would be a different case if it [PDIC] were private," he said.-PAUL C.H. HOW, Business World Reporter