AS MUCH as P1.8 trillion trade data discrepancies under the tax and customs system may be addressed once the bank secrecy law is relaxed, the Department of Finance (DOF) said.
In 2014 alone, there was a gap of P1.8 trillion in the value of imports as reported locally and the value of shipments to the Philippines as recorded by exporter-countries, the DOF noted, citing data from the United Nations Comtrade World Exports.
This massive gap or leakage translates into foregone revenues of roughly P231 billion or 2 percent of the gross domestici product (GDP), Finance Secretary Carlos Dominguez said in a statement on Friday.
The government intends to correct the discprepancies with sweeping reforms in tax policy and administration as part of the proposed comprehensive tax reform program.
“In order to bridge this gap, we need to relax bank secrecy for fraud cases, simplify and automate processes, and improve the ability of customs to enforce the law,” Dominguez said in a recent tax forum.
The DOF has said the plan to lift the bank secrecy law will affect only those who are under investigation for tax evasion or fraud.
What the government wants is to enable the Bureau of Internal Revenue (BIR) to access bank records without seeking court permission, which will be the mandated policy under the implementing rules of the BIR.
The Law on Secrecy of Bank Deposits or Republic Act 1405 makes bank deposits confidential, including investments in bonds issued by the government, its political subdivisions and its instrumentalities.
It has been pointed out in a recent report by a World Bank Group as one of the strictest in the world that hampers the Anti-Money Laundering Act (AMLA) compliance review programs.
The proposal to to revise RA 1405 is in line with the recommendations by the Bangko Sentral ng Pilipinas, the DOF and multilateral organizations to strengthen the AMLA.
Reconfiguring the economy
Correcting the discrepancies between the volume of imports reported to the government by the traders and the actual figures recorded by their foreign suppliers is part of the DOF’s efforts to improve the efficiency of the tax and customs systems in order to generate more revenues.
Dominguez also raised the possibility that the gaps could be the result of timing issues and the inclusion and exclusion of particular commodities in reporting, and not outright proof of smuggling.
He said the DOF would be sending the Bureau of Customs (BOC) personnel to the exporting countries involved to reconcile trade records and determine the real reason behind the discrepancies “in order to plug possible leakages and allow the government to collect the right amount of taxes.”
Tax policy and administration reforms are crucial to raise enough revenues for reconfiguring the Philippine economy and attaining the Duterte administration’s goal of inclusive growth under its 10-point socioeconomic agenda, the DOF said.
The DOF submitted to the House and the Senate its proposed Tax Reform Roadmap for Acceleration and Inclusion Act on September 26.