(BDB Law’s “Tax Law For Business” appears in the opinion section of BusinessMirror every
Thursday. BDB Law is an affiliate of Punongbayan & Araullo (P&A).
Positive news is out: Negative net worth is in
As we welcome 2008, many are hopeful it will be more fruitful and meaningful than the
previous year. Many have their lists of resolutions, vowing to do this and that, while
some have the expectations of performing better and achieving greater heights. Others
simply just want to take a leap of faith and have a new beginning.
Tax amnesty is a general pardon extended to taxpayers who want to start a clean tax
slate. At the same time, it also gives the government an opportunity to collect and
recoup uncollected taxes without going through the prolonged and tedious process of a
tax case.
When Republic Act 9480 (RA 9480) came into effect June 16, 2007, taxpayers rejoiced
because the government granted an amnesty on all unpaid internal-revenue taxes for
taxable year 2005 and all prior years. Taxpayers eagerly awaited the issuance of the
Department of Finance Order 29-07 implementing the provisions of RA 9480, optimistic
that they would finally be able to settle their tax liabilities and/or deficiencies.
However, many were taken aback when the Bureau of Internal Revenue (BIR), through
RMC 69-2007, explicitly declared that only those taxpayers with positive net worth were
covered under the tax-amnesty law. Taxpayers raised a howl and questioned the
directive as well as the intentions of the BIR; the bureau reconsidered its position and
subsequently issued RMC 90-2007, which amended Q & A No. 28 of RMC 69-2007.
The issuance of RMC 90-2007 is a welcome reprieve for the numerous taxpayers who
were previously disqualified from availing themselves of the incentives under the taxamnesty program of the government, pursuant to RA 9480. Companies in a deficit
position may now avail themselves of the tax amnesty as well, so long as the
amendments made to the taxpayer’s balance sheet resulted in a reduction in the deficit
earlier reported. In such a case, the resultant decrease in the deficit shall be the basis
for the computation of the 5-percent amnesty-tax rate. The amnesty tax payable shall
depend on whichever is higher between the resulting figure after applying the 5 percent
on the reduction in capital deficit and the prescribed minimum amount. RMC 90-07 will
allow, for example, those companies under dissolution with negative net worth to avail
themselves of the tax-amnesty program for purposes of securing their tax clearance. But
the question is: How would they get the required increase in the net worth or reduction in
the deficit to qualify for the program, considering that they are already ceased
operations?
The BIR was adamant in pronouncing that “companies in a deficit position who will not
amend their balance sheets are not qualified to avail [themselves] of the tax amnesty.”
The above-mentioned declaration brings to mind the Supreme Court’s proclamation that,
“to avail [himself/herself] of a tax amnesty granted by the government, and to be immune
from suit on its delinquencies, the taxpayer must have voluntarily disclosed his [her]
previously untaxed income and must have paid the corresponding tax on such
previously untaxed income.” (Bibiano V. Bañas Jr. v. Court of Appeals et al., G.R. No.
102967, February 10, 2000)
From the looks of it, the BIR is clearly of the mindset that the on-going tax-amnesty
program of the government is centered on a give-and-take relationship. Before a
taxpayer can enjoy the benefits offered by the tax-amnesty program, he/she must first
make a clean breast of his/her delinquencies to prove the sincerity of his/her intentions.
The tax-amnesty program enables the government to collect revenues without having to
undergo adversarial proceedings—thereby saving precious time, effort and money that
may be used for other worthwhile activities. Still, it is no free ride since the government is
also forced to forgo a portion of the tax liabilities/deficiencies assessed against erring
taxpayers availing themselves of the program.
On the other hand, taxpayers pay the prescribed amnesty fee as an assurance against
tax worries, at least for the moment, enabling them to use their precious time pursuing
business activities instead of wasting it disputing the BIR’s offensive.
It is not new to dream of a new beginning. But let us keep in mind that before we can
proceed and have the fresh start we desire, we must first stand firm and be accountable
for whatever transgressions and lapses we had made in the past.