MANILA - Amid the controversy surrounding the estate tax liabilities of the Marcos family that surfaced ahead of the May 9 elections in which former Sen. Ferdinand "Bongbong" Marcos, Jr. is participating as a presidential contender, some may wonder what happens when people do not pay their estate tax.
Tax expert Mon Abrea on Thursday explained that estate tax is imposed for the transfer of inheritance from the predecessor to the heirs.
He said there are 3 types of estate taxes, namely: capital gains or for purchased properties, donor's tax for donated, and estate tax for an inheritance.
He added that estate tax won't be able to distinguish whether properties were legally or illegally obtained.
Failure to pay estate tax deprives inheritors of access and benefits from properties left by the deceased, said Abrea, a certified public accountant and tax consultant.
"Ang estate tax ay hindi buwis sa namatay, at hindi rin buwis sa mga properties," he told ABS-CBN News.
"Ito ay buwis sa pribilehiyo na i-transfer yung title o pagmamay-ari ng iniwan ng namatay. Kaya kung hindi mo ito bayaran, hindi mo dapat gamitin, o wala ka dapat access o benefit doon sa inheritance," added the founding Chairman of the Asian Consulting Group.
(Estate tax is not tax for those who passed on, and not a tax on properties. It is a levy on the privilege to transfer the title or ownership of properties owned by someone who died. If you won't pay for it, you should not be able to use or access or benefit from the inheritance.)
Marcos is facing backlash for failure to settle his family's estate taxes that has already ballooned to a total of P203 billion. His father, the late dictator Ferdinand Marcos, died on Sept. 28, 1989 in Hawaii.
He had said that issues regarding his family's ill-gotten wealth and alleged estate tax liabilities involved "a lot of fake news", while his spokesman claimed that the reported tax liabilities are still pending in court.
On Wednesday, Finance Secretary Carlos Dominguez confirmed that the Marcoses have not settled the tax due and that the BIR is "demanding" payment.
A Supreme Court document stated that its June 5, 1997 ruling on the issue became "final and executory" on March 9, 1999.
Abrea said the current process the Bureau of Internal Revenue and the Department of Finance is undertaking to sell levied Marcos assets could actually net the government more than the P203 billion owed by the Marcos family, if those assets are sold at a favorable price.
While estate tax is simple enough, it is very difficult for both the BIR and the inheritors for a number of reasons. One, the BIR is entirely dependent on the inheritors to file an accurate estate tax return.
Unlike income tax where the BIR can actually ask the taxpayer how much money is coming in, it has to rely on third parties to find out the value of an estate being inherited.
Meanwhile, it is very common for inheritors to be far less financially stable than their ancestors.
If they inherit vast lands or large sums of cash in a bank account, they will have to pay a large estate tax before gaining access to those assets.
It is very often that inheritors unable to pay the estate tax simply give up their inheritance.
Abrea said there are 3 remedies available to the BIR to collect the unpaid tax:
- They can levy penalties of 20 percent per annum (which was done on the Marcos estate)
- They can seize Marcos' assets and sell them to pay for the tax liability (which is also being done by the BIR as per Dominguez)
- They can file criminal charges against the estate tax evaders (which many parties are now urging the BIR to do)
Several groups including the Akbayan Partylist, AWARE or the Alliance of Women for Action Towards Reform, as well as retired Supreme Court Associate Justice Antonio Carpio, and former BIR Commissioner Kim Henares have urged the filing of a criminal case against Marcos and his family for the alleged refusal to pay their estate taxes.
Filing criminal charges now could prevent Marcos from getting "tax shield" in case he wins in the upcoming elections, Carpio has said.