DOF backs easing of Bank Secrecy Law

Lawrence Agcaoili, The Philippine Star

Posted at Sep 10 2015 11:00 AM | Updated as of Sep 10 2015 07:00 PM

Gov't stands to gain additional P300-B from tax payments

MANILA, Philippines - The Department of Finance (DOF) said yesterday the easing of restrictions in the Bank Secrecy Law could boost the national coffers by at least P300 billion.

Finance Secretary Cesar Purisima said the lifting of the existing Bank Secrecy Law for suspected tax evaders and the use of tax evasion as a predicate crime in the Anti-Money Laundering Act (AMLA) would boost government coffers as more self-employed individuals are expected to pay the correct taxes.

Purisima said the proposed legislation amending the existing Bank Secrecy Law would not be passed within the remaining term of President Aquino as elections is just around the corner.

“Realistically I don’t think we have the time to pass it during the Aquino administration. During election time, the tendency of those who are running is to take the popular position. But the true test of statesmanship is really pushing for measures which may be unpopular but is good for the country,” he said.

According to Purisima the Philippines together with Lebanon and Switzerland are the only countries in the world that have a Bank Secrecy Law and the Philippines together with Lebanon are the two remaining countries in the world where tax evasion is not a predicate crime in anti-money laundering activities.

This, according to him, is why self-employed individuals are emboldened not to declare their true income and pay the correct taxes.

The Finance chief said only 400,000 of the 1.8 million self-employed individuals in the Philippines file their income tax returns and pay an average of P33,000 each for a total amount of P12 billion per year.

Once the amendments to the Bank Secrecy Law are passed, he believes more self-employed individuals would be forced to pay the correct taxes to the government.

According to Purisima, the government could raise at least P300 billion assuming the number of self-employed individuals filing their income tax returns increases to 1.5 million with an average payment of P200,000 per year.

Purisima said over 90 percent of the income tax collections coming from taxes withheld from fixed income earners are remitted to the Bureau of Internal Revenue (BIR).

“How come that self-employed individuals particularly professionals are emboldened to take the risks? We are going to war blindfolded and it is almost impossible to ferret out the wealth or income that they have not declared,” he said.

For her part, BIR commissioner Kim Henares said the Financial Action Task Force (FATF) could again blacklist the Philippines by 2018 or even earlier if it fails to ease the Bank Secrecy Law and use tax evasion as a predicate crime to AMLA.

“Whether we like it or not the day will come. We will be evaluated again by FATF in 2018, if it is not in the law then we are again at a risk of being blacklisted,” she warned.

Being included in the countries blacklisted by FATF would translate to higher financial transaction costs and stringent cross-border measures for money transactions that could affect remittances.

Early last year, the FATF downgraded the Philippines to its dark grey list, warning a blacklisting. It had asked the country to expand predicate crimes and covered institutions under the law as well as to criminalize terrorist financing.

A blacklisting means possible sanctions to be imposed by the international financial community, like more costly and stricter requirements for financial transactions.

Once passed, financial officials said legislators could pursue measures easing the burden of taxpayers in the country.

“We cannot do it with piecemeal approaches because that will be slippery slope. If Congress is really keen on making our tax structure more buoyant, more equitable, more progressive, and giving our people more purchasing power, we have to sit down on a wholistic approach,” Purisima said.

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