MANILA, Philippines - The head of the Bureau of Internal Revenue (BIR) stressed the need to lift the bank secrecy law for tax purposes to bring the Philippines in line with countries establishing a single and consistent global standard in tracking tax fraud.
BIR Commissioner Kim Henares said the country must take a step toward enhancing transparency in a bid to protect the integrity of its tax system and fight tax evasion.
She urged lawmakers to lift the bank secrecy law amid renewed calls for greater exchange of information and increased transparency worldwide.
The bank secrecy law is a special legislation that allows and requires banks and financial institutions to protect and keep confidential customer information from third parties even if these are government or tax authorities.
The breach of bank secrecy is a criminal offense for any bank employee to divulge all types of personal and financial data, including deposits and number of accounts or transactions except in the case of the gravest crimes, a category that did not include tax evasion.
Confidential information received by a bank concerning its client’s financial and personal affairs will remain secret unless the client relieves the bank of its duty.
Any violation of this law will subject the offender upon conviction, to an imprisonment of not more than five years or a monetary fine, or both, in the discretion of the court.
The only way to lift bank secrecy is through a court order from a local judge, which even authorities must get if they want access to information.
Henares said “the Philippines must commit to lift bank secrecy for tax purposes to help determine whether a person is paying the right taxes. The lifting of the bank secrecy shall only be limited insofar as administrative assistance on tax matters is concerned.”
She noted that it is only a matter of time before international standards are in place that would automatically hand over full information about depositors to other countries’ tax authorities.
The Organization of Economic Cooperation and Development (OECD) plans to introduce a new global standard for the automatic exchange of information between tax authorities to make it difficult for people to funnel investments outside of their country of residence.
“Sooner or later, we have to remove that bank secrecy law for tax purposes, because that will be a requirement, globally. The OECD and the United States are requiring transparency in data, including bank data. So whether we will like it or not, eventually, we will get to that point. Otherwise, we will be blacklisted as a country and our economic development will be affected by it,” Henares pointed out.
Most developed nations share information on bank deposits on demand.
Lawmakers, however, have been very vocal about their opposition to the lifting of the bank secrecy law, saying this is violative of an individual’s constitutional right to privacy.
The BIR has suspended the implementation of a regulation that requires individual taxpayers to declare the income earned on their bank deposits and other investments in their tax returns.