Business Mirror

Atty. Irwin C. Nidea, Jr. discusses the draft tax amnesty implementing rules, its flaws, and how it diminished the letter and spirit of the Tax Amnesty Law.

The Draft Implementing Rules of the Tax Amnesty Law

By Irwin C. Nidea Jr.

The Tax Amnesty Law is still not in effect until the effectivity of its implementing rules. The BIR has circulated a draft where some provisions may have undermined the true intentions of the law.

First, as regards the coverage, the draft IRR has excluded unpaid tax liabilities arising from non-payment of self-declared or self-assessed tax (i.e., unpaid tax due per return filed).The draft IRR only covers assessments that have become final and executory. But the law provides for a broader coverage. It states as follows:“(a) Delinquencies and assessments, which have become final and executory…”If the law wants to cover only assessments that have become final and executory, it should have deleted the word “Delinquencies”. But by including delinquencies, the law clearly wants to include all that is covered by the said word, which includes self-assessed tax.

Second, the law covers pending criminal cases with the DOJ/Prosecutor’s office or the courts for tax evasion or other criminal offenses, with or without assessments duly issued. But to avail of amnesty, the taxpayer must pay 60% of the tax that is being assessed. What if a criminal case that is pending with the DOJ or the courts does not include an assessment? How can a taxpayer pay for amnesty since there is no base amount from which the 60% amnesty tax due may be derived from?

Third, assessments that have become final and executory before the effectivity of the implementing rules are covered by the Tax Amnesty. What if a taxpayer who protested a final assessment notice, decides to withdraw the said protest before the effectivity of the implementing rules, is he still qualified to avail of the Tax Amnesty? If yes, it is better if the BIR issue a Revenue Memorandum Circular that will affirm this position and lay down the procedure, to this effect.

There are cases that are pending before the courts where a taxpayer is only questioning the validity of the warrant of distraint and levy or collection notices. In other words, the BIR has issued Final Assessment Notices where the period to appeal to the CTA has lapsed but the collection has been stalled because of an appeal by the taxpayer questioning the validity of the collection process. Are these of types cases covered by the Tax Amnesty?

Fourth, there is a difference in the treatment of advance payments made for denied application and pending application for compromise settlement. It is better that they are treated the same for easy administration. Also, those with pending compromise applications, may be in a more advantageous position. They may end up paying zero tax amnesty due. For example, if a pending application for compromise has paid 40% of the P1,000,000 basic tax due, which is P400,000, its amnesty tax due is zero. On the other hand, a denied application for compromise will still have to pay P240,000, as shown in the example of the IRR.

Finally, in the manner of availment, there is no timeline indicated in the procedure. It is better if deadlines within which the BIR officers concerned must act are indicated to guide the taxpayers and the BIR officers alike, on a reasonable expectation when the tax amnesty application is supposed to be completed and approved.

The present Tax Amnesty is a watered-down version as a result of the partial veto by the President. If the implementing rules will further limit the coverage, the success of the law might be undermined. I hope that the implementing rules will leave no stones unturned and will be more comprehensive and inclusive.