Finance department open to pardoning tax evaders

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(File photo) The Department of Finance wants to increase its revenue collections, not by raising taxes and running after tax evaders, but by doing otherwise.

Metro Manila (CNN Philippines) — The Department of Finance (DOF) wants to increase revenue collections, not by increasing tax rates, but by lowering them and possibly even pardoning tax evaders.

"A system of high taxes is counterproductive it acts as an incentive for evasion. The government ended up collecting less taxes over the years," Finance Secretary Sonny Dominguez said in a forum on Tuesday.

The previous administration tried to name and shame tax evaders. Former Bureau of Internal Revenue (BIR) Commissioner Kim Henares filed nearly 500 criminal cases during her six-year term. The DOF then also launched several publicity campaigns naming professions and businesses with glaring inconsistencies in their tax payments.

But Dominguez said this was the wrong tack. "No amount of shaming will stop them," he said.

The first item on the agenda is to make the tax system more "reasonable." Cutting down personal and corporate income taxes could encourage more compliance among taxpayers, he said. This is also in line with the election campaign promises made by President Rodrigo Duterte.

"Filipinos voted overwhelmingly in May to cut tax rates. It makes both economic and political sense," he said.

Moreover, the DOF is open to offering amnesty to tax evaders.

"We are certainly going to think about the program very carefully. We will consider all the proposals," Dominguez said.

He added there would likely be strong interest among taxpayers, who would want to settle part of their back taxes in exchange for avoiding a criminal or administrative case.

The last tax amnesty was offered in 2007 under the Arroyo administration. It increased collection, but the International Monetary Fund and other economic think tanks opposed it, warning it could encourage taxpayers to keep dodging the law.

Also read: Income tax reform to benefit poor, middle-class the most

Bang for the buck

Addressing the business community, the Finance chief identified other reforms that are in the works.

On the revenue side, the DOF will push for the speedy resolution of nearly 650 tax evasion cases still pending at the Department of Justice. Together, these are worth an estimated ₱103 billion.

The DOF will also expand the tax net for large taxpayers. Only 2,300 companies make up bulk of tax revenues — a number that is "too small" and "cannot be accurate," according to Dominguez.

On the flipside, Dominguez assured the government would not "indulge in unmitigated spending" amid repeated criticism of the previous administration’s inability to make the most of its money.

Instead, the government will revise the procurement law and simplify the process for rolling out infrastructure projects.

For the public-private partnership program, project approval should be completed in 20 months — down from the current turnaround time of 29 months.

To streamline his department’s operations, Dominguez appointed Undersecretary Gil Beltran as its "anti-red tape czar." Beltran will be responsible for cutting down the documents and processing time needed to transact with the department and its attached agencies. This includes transactions such as paying taxes, releasing imports, claiming tax refunds and more.

"The main goal is to improve spending. Basically, we want to deliver bigger bang for your buck," Dominguez said.