Taxpayers turned off by tax amnesty

Taxpayers turned off by tax amnesty

by Joy S. Formaran-Duclan

The clock is ticking and there is still so much to do to prepare for the government’s tax amnesty program. Taxpayers have less than a month or exactly 22 days before the deadline set by law to avail themselves of the tax amnesty. But up to now there are still some taxpayers who have yet to decide whether or not to avail themselves of the tax amnesty program.

Why not take advantage of the benefits of the amnesty? Getting a tax amnesty provides immunity from payment of deficiency taxes and the applicable penalties, as well as immunity from examination of the books of accounts and other records for the years covered by the  tax amnesty.

The amnesty is definitely an opportunity for taxpayers to be unburdened of their existing assessments or be spared from the ongoing audit examinations or simply an opportunity to start a new business life without worries of being haunted by the prior year’s errors or mistakes.

When the Tax Amnesty Law was approved, most taxpayers were excited and seemed ready to avail themselves of this one-time opportunity. Taxpayers then couldn’t wait for the Bureau of Internal Revenue (BIR) to issue the implementing rules and regulations which took the latter at least two months to issue. After the implementing rules and regulations were promulgated, various circulars subsequently followed. By this time however, for one reason or another, the interest of the taxpayers to avail themselves of the tax amnesty seemed to have waned.

For some taxpayers, the hesitation arose with the additional exceptions from the coverage of the tax amnesty provided in the revenue memorandum circulars issued by the BIR. Specifically, the BIR declared that issues and cases which have been ruled upon by the courts (even without finality) in favor of the BIR prior to applying for amnesty will not be covered.
The inclusion of the word “issues” in the phrase seems to invoke the Latin maxim “stare decisis” which means to abide by or adhere to decided cases.  With this exception, many taxpayers feared that the issues raised by the BIR during audit or investigation, whether with or without basis, may be invoked by the BIR to disqualify the taxpayers from the tax amnesty. This holds true as long as there are cases with similar issues on which a favorable decision has been obtained by the BIR regardless of the fact that the said issue or issues of the assessment has not been elevated to the courts.

With the additional exception, taxpayers are now torn between two considerations. On one hand are the immunities and privileges offered by the tax amnesty, while on the other are the issues on stare decisis that could disqualify the existing assessments of taxpayers from the coverage of the tax amnesty. Given these considerations, there is no doubt that taxpayers will hesitate to avail themselves of the tax amnesty not to mention the fact that there is a related issue with the external auditors in cases of under-declaration of net worth.  This stressful torment sometimes causes taxpayers to seek advice from tax consultants to help them weigh the consequences and see the better picture under each consideration involved.

However it is worthwhile to go back to the provisions of the tax amnesty law and review the exceptions originally provided. It would seem that the BIR has exceeded its authority in interpreting and implementing the law when it included certain exceptions which were not originally there. The additional exceptions provided by the BIR through its issuances may be subject to legal scrutiny for having exceeded its authority and jurisdiction. But then again, comes the question: Is the taxpayer ready for the challenge or does the taxpayer have enough resources and time to raise the issue in the proper forum? There is no question that the BIR has to meet its objective to raise enough revenues to be used by the government. However, it was the government itself that grante d this tax amnesty. In doing so, it should be willing to lose few coins to meet the purposes of this tax amnesty law.

(The author is a tax manager at Punongbayan & Araullo, member of Grant Thornton International. For comments and inquiries, please e-mail the author or call 886-5511.)