Tax Amnesty Veto and its Consequences

By Julius Esquivias

When the Tax Amnesty Act was signed on February 14, 2019, President Duterte did not agree with all the provisions that Congress wanted to include. Instead, the President articulated his veto on a number of items on the Bill including, among others, the General Tax Amnesty, the provision allowing the one-time declaration and settlement of estate on taxes on properties subject of multiple unsettled estates, and the provision raising the presumption of correctness of estate tax amnesty returns.

Such veto resulted in a Tax Amnesty Act that is not as forgiving on erring or negligent taxpayers than they would hope for. The Act itself was essentially left with the following benefits: a) Amnesty on Estate Taxes, b) Amnesty on Tax Delinquencies and c) the Confidentiality of Tax Amnesty Returns and the Statements of Assets and Liabilities and Net Worth, that availing taxpayers would need to submit.

The reasons behind the vetoing of items were sound. For one, the general tax amnesty was shot down because the bill did not compel availing taxpayers to waive bank secrecy laws. Allowing taxpayers to self-declare their assets and liabilities without giving the BIR the power to counter check the cashflow involving relevant transactions would likely result in a proliferation of untruthful declarations and a sizeable amount of revenue loss. The veto on provisions allowing for a one-time settlement across multiple unpaid estate taxes, in turn, rests upon the idea that the 6% flat rate imposed on every level of estate tax due is both fair and easy to comply with. Lastly the veto on the presumption of correctness of estate tax returns allows the BIR to audit and investigate all applications properly, without being estopped by such presumption.

With all this said, the resulting Act had an unintended consequence. Those taxpayers with pending Letters of Authority (“LOAs”) who opted to delay resolving their tax issues and instead relied on the expected one-time Amnesty to resolve their tax deficiencies, are once again left to face their live cases. Taxpayers with open cases, including those with pending Letter Notices, Tax Verification Notices, LOAs, ongoing cases at the DOJ or the Court of Tax Appeals, Requests for Compromise/Abatements, Appeals to the Commissioner, Ruling Applications and other audit-related procedures are thus forced to advocate their positions in different fora.

Taxpayers, of course, can choose among many different avenues to resolve their pending cases both at the administrative level and the judicial system. They can opt to avail of remedies at the District or Regional levels, or they can resort to elevating their issues with any of the Deputy Commissioners or the Commissioner himself, at the National Office.

With the option of availing for the General Tax Amnesty being off the table, the most important step in resolving a taxpayer’s tax issues would be ensuring that he avails of the proper administrative or judicial remedy lest a Tax Deficiency Assessment becomes Final and Executory.

Fortunately, the BIR’s officers of the day can ably answer most if not all of the routine questions regarding an ongoing tax audit. For other concerns, it would be best to seek out advice from professionals in the accounting and legal fields.