Tax amnesty to drive Phl infra upgrade

As Indonesia reported netting more than $10 billion from a tax amnesty, the Philippine government said it’s mulling a similar move. To supplement the tax reform program and raise additional revenues, Congress passed House Bill 4814, entitled An Act Granting Amnesty in the Payment of Estate Tax, or the Estate Tax Amnesty Law (HB 4814).

The measure grants estate tax amnesty within two years from the issuance of the implementing rules and regulations of the measure (estate taxes for 2016 and prior years) at a rate of six percent of the decedent’s net estate. Failure to pay estate tax will result in exposure to penalties, which include a 25 percent surcharge and 20 percent deficiency interest per annum.

It also provides immunities and privileges to amnesty beneficiaries, including immunity from the payment of estate tax and from civil, criminal or administrative penalties. The government will target tax evaders and beef up compliance before adopting an amnesty program.

Challenges

Bank Secrecy Law - A legacy from the 1950s, is comparable to similar statutes in Switzerland and Lebanon. Bills have been filed in Congress that seek to ease these restrictions as this is a necessary approach to ensure the successful implementation of Tax Amnesty in the Philippines.

OECD Standard - The Automatic Exchange of Information arrangement by the Organization for Economic Co-operation and Development was a key reason for the success of Indonesia’s tax amnesty. Under the agreement, signed by Singapore and Indonesia but not by the Philippines, countries will start in 2018 to share details of their nationals that hold bank accounts in other countries without the need for specific requests.

Future Implications

The Duterte administration’s infrastructure program is expected to provide many benefits to the country and the economy such as:

Boosting economic growth - The massive spending on infrastructure projects will spur economic activity, boost revenues of related industries and possibly will give rise to the next leg of the secular bull market in Philippine stocks.

Improved flow of goods - Better roads, railways, airports and sea ports will improve the flow of commodities and products not only within the country, but also to and from the country. This will result in lower transportation costs and increased competitiveness for many industries. Also, better roads and improved mass transport will reduce travel times and result in higher productivity (Reduced Traffic!).

Job creation - The construction of large-scale infra projects and the resulting economic development from the initiatives will create millions of jobs for Filipinos nationwide and an expansion opportunity for small and big entrepreneurs.

Tourism Development - The tourism industry will immensely benefit from better airports and roads, which should lead to increased investments in the sector as well as our country's global reputation as a go-to travel destination.

Decongestion of Metro Manila - Building green cities and urban centers outside Metro Manila will address the over-concentration in the country’s capital. Such projects will decentralize and diversify economic development while also stimulating the economic expansion of other provinces. This may also lead to a decentralization of national offices as well.

To tax and to please, no more than to love and to be wise, is not given to men - Edmund Burke

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The writer is an RFP® - registered financial planner of RFP PH, Licensed Real Estate Broker and Director of CERTA, Inc., a family estate planning and investment advisory firm. To know more, please visit www.certa.ph
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Originally Published in Philstar - The Freeman Newspaper last May 9, 2017.