Taxation

Reaction Paper on RR 2-2014

Submitted By Oscar Ryan Santillan

Submitted To: Atty Vicente Canoneo

Last February 3, 2014, BIR Commissioner Kim S. JacintoHenares released Revenue Regulation Order 2-2014 which prescribes the new income tax form. Accordingly the said Revenue Regulation was published in both the Manila Bulletin and the Philippine Star last February 6, 2014. With the new form came attach to it new set of controversies namely ,those that Valenzuela Representative Magtanggol Gunigundo had accused, that the said regulation compels a citizen to allow violation of his rights under the laws on Secrecy of Bank Deposits, Anti-Money Laundering Act and the Tax Code.. Representative Gunigundo further explained that the new form requires the taxpayers to declare their interest on bank deposits. As can be gleaned from the new form it mandatorily requires individual taxpayers to declare in their 2013 income tax returns earnings which are either exempt or subject to final withholding tax like interests on bank deposits. Republic Act 1405 also known as the Act prohibiting disclosure of or inquiry into deposits with any banking institution and providing penalty therefor provides that in: Section 2: All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation. Section 3: It shall be unlawful for any official or employee of a banking institution to disclose to any person other than those

mentioned in Section two hereof any information concerning said deposits. The purpose of the law according to its framers was to give encouragement to the people to deposit their money in banking institutions and to discourage private hoarding so that the same may be properly utilized by banks in authorized loans to assist in the economic development of the country. This so called regulation is not new, it was once introduced by the same Commissioner two years ago after Representative Gunigundo and Representative Rufus Rodriguez opposed the said regulation and strong pressure from the Congress, Commissioner Henares made it into optional provision. And now, Commissioner Jacinto-Henares is reintroducing the said regulation and further iterated that it would be mandatory. As for her reasoning for the said implementation of the said regulation she stated that the BIR management sought the inclusion of such information to tax profile well-to-do individuals if they are paying the right amount of taxes. Aside from interests on bank deposits, individual tax filers are required to include in their ITR gross earnings derived from royalties, dividends, prize on winnings and fringe benefits as well as income derived from sale of real estate properties and shares of stocks which are all subject to final withholding tax. To be included in the ITR are income exempt from income tax like proceeds from life insurance, pensions, retirement benefits and gratuities and other properties received through gifts.

Reaction: I like to tackle this issue in two fold mainly as a law student and second as a man who is knowledgeable in business. As a law student, the regulation is a clear apparent violation of the provision provided by law either in the Tax Code, the law on Bank Secrecy and the Anti Money Laundering act. The so called new form had made the declaration mandatory rather than an optional one and the regulation lacks a lot of lawful merit. The purpose of the Commissioner may be good yet at the end of the day we have to follow the foremost fundamental law of the land which is that our country is run not by men but by law. Her actions in instituting said regulation and putting it in the BIR form is a way for her to circumnavigate the way to push the said regulation. If before she had a strong pressure to make it optional but by putting it in the form directly it then connotes to individuals a mandatory form. It is a smart move for her but still not allowable by law. I find it rather odd also that the title of such form is the implementation of Bar Codes in the form and then adding provisions and regulations she deemed good for the BIR Management but strongly opposed by the Congress. As being so evident in her previous action we could humbly say that she is acting as a lawmaker when in reality she is a Commissioner who is bound by the duty that the Congress provided her. As a person in business, her actions and regulations provides us one thing that she is ill equipped to handle the said agency. Yes I applaud her in doing things to increase the coffers in the land through tax implementation with her duties and that her foremost duty is to collect taxes let us not forget that but if you will see she is only good in creating new regulations to collect or to implement such and have not found any way to implement new regulations those who are evading taxes. What I am trying to point here is that for those who are paying taxes promptly and regularly she is milking them more when

those who are not paying or evading taxes she let them roam free. This regulation is evident of that action, if I a taxpayer already declares and pays my due to the society through taxes yet still the Commissioner wants to get more from me. There are a lot of loopholes in the tax system yet she doesnt look for ways to stop these loopholes. The purpose of the framers of Bank Secrecy Law is much favorable to the purpose of the RR 2-2014. Although it may be a loophole but in the end the purpose is so favorable that the economy of the country is the winners as much as the taxpayer. With the law on Bank Secrecy, it provides bank to get more deposits as well as a way to provide money for loans to each depositor. We are already regarded as the country with the toughest Bank Secrecy Law and with it more foreign depositors trusting our banking system which in the end help boost the economy. As we had learned our laws had made us into an economic powerhouse and such laws is what we need more to boost our competitiveness and stability as a country

Conclusion As an individual, I may applaud her in publicly looking for ways to be controversial and be in the news for free, starting from the ouster of former Chief Justice Corona to this implementation of a new form which carries with it her former rules to circumnavigate those oppose her actions. Yet here we see a wrong law being made good by a wrong public official. The law is the law and we must follow that law and no matter what standard you put or good purpose you may think of but we must still follow the law. This radical thinking of her is making us poor in the eyes of both the local and the foreign investors. Just imagine we encourage them through our laws which are made by congress and backed by the constitution and then being trapped by a Commissioner just to get a very good limelight in the eyes of the taxpayer viewing public. As a conclusion, let us follow the law and dont try to circumvent the law. This is a country run by law not by men.