IMF urges Duterte gov’t to repeal bank secrecy law to improve tax collection
MANILA — Lifting the bank secrecy law is one of the tax measures that should be implemented by the incoming administration if it wanted to improve tax collections and shore up revenues, according to the International Monetary Fund (IMF).
“Elimination of banking secrecy is of the utmost importance. Current provisions for taxing interest, in particular, differ widely and randomly, across holders, issuers, maturities, and currencies. These withholding provisions should be unified, particularly in light of the increasing integration of the Philippine financial sector with the rest of Asean,” the IMF said in its tax reform recommendations to the Department of Finance (DOF).
In turn, the DOF is working on a comprehensive tax reform package it will again pitch for consideration of the incoming Duterte administration.
The IMF said one of the “important problems” in the Philippine tax system has been “the strict banking secrecy law, which prohibits the Bureau of Internal Revenue (BIR) from obtaining any data regarding taxpayer’s income or wealth from Philippine banks.”
In the Tax Management Association of the Philippines (TMAP) tax policy survey answered by Duterte ahead of the May 9 elections, he supported the lifting of the bank secrecy law consistent with international standards to enable revenue authorities to combat tax evasion.
Last year, President Aquino turned down the DOF’s comprehensive tax reform proposal as he was cold to moves aimed at reducing income taxes.
The DOF was pitching a package aimed at drastically easing the burden of income taxpayers while also slapping new or higher taxes on consumption. It includes policy measures entailing legislation as well as tax administration improvements, which the DOF had claimed would lead to a “competitive, equitable and progressive” tax regime.
The BIR as well as the DOF have long been pitching for the enhancement of measures against base erosion and profit-sharing by repealing the bank secrecy law for taxation purposes and the inclusion of tax evasion as predicate crime to money laundering. SFM
