Lift bank secrecy now or never!

As long as it will apply first to all our honorable congressmen and senators, I think we should pass it first before any reform in government takes effect to stop corruption, tax evasion or even smuggling. This, together with the Freedom of Information Act will greatly uplift morale and public trust, and promote honesty and integrity among government and business leaders in the country.

I guess the principle of leadership by example, not by exception, must strictly be observed if we really want this to work. We don’t need to look far as our politicians, tax collectors and the “very rich” political campaign donors can very well give us a good example by declaring all their assets, liabilities, and net worth completely and correctly, including those of their immediate family members and their “dummy” holding corporations.

It surprised me why the Securities and Exchange Commission (SEC) reluctantly approved or allowed several “dummy” holding corporations and nonprofit organizations who are incorporated by nominal or fake incorporators. How can a driver or a nanny of a politician incorporate a business when they only get minimum wage income? Sure they can have a tax identification number (TIN) which is practically the only requirement to be an incorporator, even without financial or even technical capacity to manage a corporation.

In school, we were taught that “honesty is the best policy.” Is it still the same or we have rationalized everything that makes anything relative to our circumstances and the people involved?

For businessmen and professionals, we have just filed our annual income tax returns (ITR) and our “supposedly” audited financial statements. How come, despite the signature of our independent external auditors, we are able to declare fictitious or erroneous income and expenses? Aren’t they supposed to audit and verify at the very least, that we declare the correct cash balance?

Now, we can expect a visit or a letter from our friendly tax collectors. Isn’t it an open secret that everybody understates their income to reduce taxes? Is the Bureau of Internal Revenue (BIR) not aware of this? Then, why audit the same companies when everybody is evading taxes anyway?

My heart bleads whenever somebody tells me that — “everybody is doing it anyway so why pay the right taxes?” BIR examiners will still assess deficiency taxes and expect a bribe money either way. Let’s just be practical and set aside a budget for the BIR audit.

So, how does the Run After Tax Evaders (RATE) really work? I don’t question the objectives of the program. In fact, I honestly believe that only ordinary employees are honest taxpayers.

As a former BIR examiner, I don’t need to imagine how this works or not. That’s the very reason why I joined BIR in 2009 to study the corruption and how it works inside and outside BIR.

Since I left in 2010, we have been promoting honesty and integrity first among the businessmen and professionals. This advocacy for a genuine tax reform is not just about lowering taxes or abolishing BIR. If we want to stop corruption in government, we need to stop bribing BIR examiners and electing corrupt politicians.

We cannot fight evil with evil. As I always say, not paying taxes is wrong. Bribing BIR examiners makes it worse. And hiring a professional accountant and/or lawyer to “fix” it makes it worst!

How can BIR run after tax evaders if the examiners are guilty themselves? The tax code states that income from all sources are taxable, including gifts and bribe money. This means all, without exception, BIR examiners who are on the take and under the payroll of bigtime tax evaders are as guilty as tax evaders since they will never declare the millions of bribe money they have accepted and continue to receive every audit and investigation.

Based on my experience, for every P1 deficiency tax collected by an examiner, the government is losing P10 to P100 revenues. This is because of the corrupt and inefficient tax system which is not just the fault of BIR. That’s why we badly need the comprehensive tax reform — both tax policy and administrative reforms.

Is honesty still the best policy? I would still say, yes.

We have to believe and live honesty as the only palatable solution to stop corruption, tax evasion, and even smuggling. Working closely with BIR Commissioner Billy Dulay, we have another chance for a genuine tax reform.

With so much faith, hope and love of country, we have proposed a program which aims to help taxpayers who have gone astray or who would want to set a good example in paying the right taxes to contribute in nation building — the Seal of Honesty (SOH) Certification Program. Center for Strategic Reforms of the Philippines (CSR Philippines) with BIR, Department of Trade and Industry (DTI) and Integrity Initiative will launch it on May 31. This aims to complement as well the proposed general tax amnesty after lifting the Bank Secrecy Law.

This article was originally published on Business World Online.

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