TAX AMNESTY BILL 2018

The tax amnesty bill filed by Pimentel, Binay and other members
of the senate focus on the enhancement of revenue administration
and collection, and broadening the tax base by granting an amnesty
on all unpaid internal revenue taxes imposed by the national
government for taxable year 2017 and prior years with respect to
estate tax, other internal revenue taxes, and tax on delinquencies
and addressing cross- border tax evasion and for other purposes.
The last tax amnesty bill was enacted back in 2005 where most of
the provisions were adopted and modified to the present bill.

The focal issues discussed on the bill are the estate tax amnesty,
general tax amnesty, and the tax amnesty on delinquencies. Each
division was provided by reasonable provisions that would cater to
the general needs of possible applicants. But it should be weighed
first if applying for the amnesty would be beneficial to some
companies. The purpose for the implementation of the bill was to
have a clean slate and fresh start in the administration and
collection of taxes. The amnesty is a way to declog the courts of
numerous pending tax cases, and reducing cost for pursuing the
said cases.

One thing that caught my attention was the different time

periods and rate for availment of the tax amnesty. On the House Bill
it was stated that it could be availed within 2 years and that early
payers will be given a higher discount but in the senate version, it
was only given six months or a year. If companies were to avail the
said amnesty, it would give them a sense of urgency resulting to
non-availment of some companies giving no justice at all to the
cause of implementation which was to decrease the number of tax
cases. Although the house bill version would be more enticing and
persuasive as to early payments, it also gives the taxpayers some
time to acquire money for payments and fulfillment of the
requirements.

For the general tax amnesty, the recent development was granting
2% general tax amnesty rate based on the taxpayer’s total assets
declared. The taxes covered by the general amnesty tax are all
internal revenue taxes for taxable year 2017 and prior years, which
remain unpaid, with or without assessment. Taxpayers who want to
avail of the privileges of the amnesty must truthfully divulge very
important information: their true total assets or true net worth. In
exchange for disclosing their true total assets or net worth,
taxpayers will be allowed to avail of the general tax amnesty
program that shall cover their taxes, subject to some exceptions, for
taxable year 2017 and prior years. The General Tax Amnesty will
give taxpayers the option to choose a rate between 2% of their total
assets or 5% of their net worth. This would be complicated to some
companies. Exposure of confidential matters is indeed
uncomfortable but it is a decent price to deal in order to avail the
amnesty. The taxpayers should be able to determine whether their
exposure for noncompliance would be much better settled under the
amnesty rules, or it is much beneficial if it is settled through a
regular assessment by the Bureau of Internal Revenue (BIR).

Another interesting point is the tax delinquency amnesty of the

bills. Both the Senate and the House of Representatives versions
lean towards providing amnesty, even for cases that have reached
the latter stage of the tax assessment process. The proposals
include a 40% rate based on the basic tax assessed for
delinquencies and assessments that have become final and
executory, a 50% rate based on the basic tax assessed for cases
that are pending in court, and a 60% rate based on the basic tax
assessed for cases subject to final and executory judgement by the
court.

The tax amnesty bills of both the Senate and the House of
Representatives are definitely getting the attention of taxpayers
since, once enacted and taxpayers avail of tax amnesty, this would
give taxpayers a clean slate.
 CORPORATE CODE

One of the most recent and controversial issues with regards to

the corporate code is the “one person corporation” which was
approved by the senate. A hybrid form of business with the
flexibility of a sole proprietorship and separate distinct identity
clause of a corporate body.

According to the bill’s authors, the amendment aims to address

problems in filling up the current requirement of at least five
stockholders for a corporation. The current practice, they said, is for
certain investors to name even their household members and hired
help as incorporators just to comply with the present rule.

As defined in the corporate law, a corporation is an artificial

being created by operation of law, having the right of succession
and the powers, attributes and properties expressly authorized
by law or incident to its existence. Notable among the amendments
to the present law is the provision on the number of incorporators.
While the old law allowed not less than five but not more the 15
incorporators to organize a corporation, Senate Bill 1280 allows
even one person to create a corporation. A corporation with a single
stockholder is called a One Person Corporation.

In the current law, business owners wishing to put up a business

organization with no partners has no other option but to set it up as
a single proprietorship. While that allows him or her to run the
business on his own, it also exposes the owner to unlimited financial
risks because he or she would be personally liable for the debts and
liabilities of the business.

On the other hand a corporation is a separate juridical entity

from the owner, shielding the shareholder from boundless risk as his
or her liability is limited to the amount of his or her investment. By
allowing “one-person corporations”  business owners can have
access to these advantages without the necessity of a partner. The
bill also prioritizes corporate and stockholder protection, helping
corporations avoid the risk of getting dissolved just because of non-
renewal of their corporate terms. 

This type of hybrid version has its drawbacks. It is only suitable

for fairly small business because it will have a limited paid up share
capital capacity and it has tax liabilities similar to corporation
consisting of more than one person resulting to possible higher tax
rate than an individual. Business activities will also be limited
because of the employee constrains.

This also comes with higher incorporation cost because the

company is required to be registered and as such, government and
professional charges will be entailed. Higher compliance cost will
arises due to yearly audit activities and filing of returns just like an
ordinary corporation does.

A One Person Company (OPC) cannot raise funding by selling its

shares and hence not preferred for startups. It increases the
compliance cost yearly because audit and other compliance are
mandatory irrespective of turnover. It cannot be converted into
private company voluntary before two years from the date of
incorporation.
 University of Perpetual Help System DALTA
Las Piñas Campus

TRANSFER AND BUSINESS TAXATION

REACTION PAPER ON NEW UPDATES ON TAX AMNESTY AND

CORPORATE CODE OF THE PHILIPPINES

March 14, 2019

Boco, Ann Margarette A.

BSA - 4