Angara: Tax authorities' proposed powers may be abused

Ryan Chua, ABS-CBN News

Posted at Sep 21 2015 05:10 PM | Updated as of Sep 22 2015 07:20 PM

MANILA (UPDATE) - The head of the Senate ways and means committee expressed reservations about a proposal of tax authorities to relax bank secrecy laws in cases of tax evasion, saying the powers they want may be prone to abuse.

Senator Juan Edgardo Angara said the Department of Finance (DOF) and Bureau of Internal Revenue (BIR), which are pushing for an amendment to the country's bank secrecy law, need to fine-tune the details of the measure. He called for more committee hearings.

"Medyo kulang pa. Medyo malawak pa ang hinihingi nilang kapangyarihan na posible pa doon ang pang-aabuso (It's somewhat wanting. The powers they want are a bit broad and can possibly be abused)," Angara told reporters.

Angara's committee on Monday, September 21, began inquiring into a proposal to relax a law that ensures the confidentiality of bank transactions, a measure the government sees as a tool to fight domestic and international tax evasion.

At the hearing, DOF and BIR officials called on the Senate to amend the country's bank secrecy law so that authorities would be allowed to look into bank transactions in cases of tax evasion, and share information with treaty partners.

A bill drafted by the BIR presented at the hearing revises the bank secrecy law's exceptions to include "tax purposes, implementation of tax treaties, or other international agreements, subject however to provisions on the confidentiality of information pursuant to section 270 of the National Internal Revenue Code of 1997."

For Angara, however, the words "for tax purposes" in the draft bill are vague. He also expressed concern about the BIR officials who will be allowed to access bank account information of suspected tax evaders.

Finance Undersecretary Jeremias Paul told the committee that under their proposal, 10 officials from the BIR commissioner to the lowest revenue officer would be granted access to bank information.

"Siguro dapat higpitan pa nila na iilang opisyal lang ang dapat tumingin (Maybe they should make the measure stricter so that only a few officials can look at bank account information)," Angara said.

Atty. Charadine Bandon, chief of BIR's International Tax Affairs Division, said the measure would allow the Philippines to meet its international obligations when it comes to tax administration, aside from helping authorities go after local tax evaders.

"We're moving toward a new standard," she said. "This standard requires tax authorities to exchange financial information on the accounts of their non-residents. They will exchange this tax information to their treaty partners on a regular basis."

Bandon said the information to be exchanged to partner countries include a depositor's name, taxpayer identification number, country of residence, and gross amount of income. She said 94 countries have committed to adopting the reporting standard.

Angara called for the inquiry in light of BIR chief Kim Henares's push for lifting the bank secrecy law for tax evasion cases, and for including tax evasion as a predicate crime under the anti-money laundering law.

In a Senate resolution, Angara also cited comments from Richard Parry of the Organization for Economic Cooperation and Development that having enough information remains the biggest challenge to running after tax evaders, money launderers, and other financial criminals.

The Philippines is one of only three countries in the world--the other two being Switzerland and Lebanon--that have a bank secrecy law.


Finance Secretary Cesar Purisima had said the nation's coffers would earn P300 billion pesos in additional revenue if the bank secrecy law is lifted for tax evaders, as more self-employed individuals would be compelled to pay correct taxes.

According to Purisima, only 400,000 out of 1.8 million self-employed individuals in the country pay taxes. He said relaxing bank secrecy in cases of tax evasion is expected to increase the number of taxpayers to 1.5 million.

Commissioner Henares had also warned that the Philippines risks being blacklisted by the Financial Action Task Force if it fails to ease the bank secrecy law and include tax evasion in money laundering predicate crimes. A blacklisting would mean higher costs and more stringest measures for cross-border financial transactions, including remittances from overseas Filipino workers.

Easing the bank secrecy law for certain cases is also seen to help get the Philippines approval for its reapplication to be part of the International Organization of Securities Commissions (IOSCO), a global association of securities and futures markets regulators.

The country's admission to IOSCO is required before it can be part of the Asia Region Funds Passport, an initiative that seeks to allow the cross-border marketing of investment products across participating countries.

The Philippines and and five other countries signed a statement of understanding for the initiative at the recent meeting of finance ministers from Asia Pacific Economic Cooperation member-countries in Cebu.