Recto Asks Senate To Prioritize Extension of Estate Tax Amnesty

Former Senator and now House Deputy Speaker Ralph G. Recto appealed to his colleagues in the House of Representatives to pass Estate Tax Amnesty Extension Bill, according to the BusinessMirror report.

According to Recto, he believes that “former classmates can pass what is a simple bill” without waiting for President Ferdinand Marcos Jr. to certify the bill as urgent.

Under the tax amnesty act, the period to file the benefits shall expire on June 14, which means the clock is ticking as per Recto.

Even if revenue bills should originally start from the House, the Senate can also already start tackling these bills, so that when the House Bill arrives in the Senate, the Senate can focus more on floor debates.

The bill moving the deadline for estate tax amnesty to June 14, 2025, has been hurdled by the House Ways and Means Committee, which paves the way for plenary debates. Through this, the passage of the amnesty would be certain.

What is House Bill No. 7409, or the Estate Tax Amnesty Extension Bill?

House Bill No. 7409 proposes to extend the period to avail of the tax amnesty to June 14, 2025, from the current deadline of June 14, 2023. The bill was co-authored by House Speaker Martin Romualdez, Majority Floor Leader Zamboanga City Representative Manuel Jose Dalipe, Ilocos Norte Representative Ferdinand Alexander Marcos, and Tingog Party-list representatives Yedda Marie Romualdez and Jude Acidre.

If this bill is passed into law, this would be the second extension of the estate tax amnesty under Republic Act (RA) No. 11213, which ran from 2019 to June 14, 2021. This was followed by Republic Act 11569 which extended the estate tax amnesty period for two years from June 15, 2021 to June 14, 2023.

The current law provides taxpayers a one-time opportunity to settle any unpaid tax obligations on the estates of decedents who died on or before December 31, 2017.

Under the Tax Code, a 6% rate is imposed on the decedent’s estate taxes at the time of death without penalties. The Ways and Means Committee also approved the provision exempting heirs from paying 6% donor’s tax on any donated estates amounting to Php 1 million and below.

According to the Ways and Means Committee Chairman and Albay Rep. Jose Salceda, this tax amnesty is yet to be optimized. He said during the committee hearing that “families still struggle to comply with documentary as well as cash requirements. Hence, our leadership filed this measure to give more time to our constituents to clear their obligations.”

The Bureau of Internal Revenue (BIR) already set a Php 6-billion target collection from the tax amnesty. Assistant BIR Commissioner Maria Luisa Belen said that 133,860 taxpayers availed of estate tax amnesty starting 2019 up to the present, generating Php 7.4 billion for the government.

The BIR reported that 61,566 have availed of the first estate tax amnesty from 2019 to June 14, 2021, generating Php 4.89 billion. And ever since June 15, 2021, the second extension garnered Php 2.4 billion from 72,294 taxpayers.

Effect of COVID-19 on Settling Estate

Rep. Salceda said that the COVID-19 pandemic hampered the attempts to settle their deceased’s estate. Salceda also said that this will be the last time to extend the estate tax amnesty, as it defeats the purpose of tax compliance if tax violations will always be forgiven.

Even Erwin Vincent Alcala, the national executive vice-president of the Philippine Institute of Certified Public Accountants, agreed to Salceda’s statement that this should be the final extension because the amnesty may be prone to abuse.

Recto was among the authors of Republic Act (RA) No. 11213 while he was in Senate. This law erased penalties and cut the rates for estate tax obligations significantly. However, the period for availing of the amnesty coincided with the COVID-19 pandemic. This prompted Congress to pass RA No. 11569, and should this period be extended for two more years, “families will save billions while the government will earn billions.”

It was said that the extension is a “lifeline to a government scrounging for revenues and an act of kindness” to senior citizens who were prevented from availing of the amnesty during the pandemic.

Recto said that this improved version of the estate tax amnesty law as it amends the cut-off period under RA No. 11213. It also now covers deaths that occurred on or before Dec. 31, 2021, from the original period of December 31, 2017.

Unlocking the Potential of Idle Assets

As restrictions began to be lifted, people now have the opportunity to settle the requirements to put their deceased one’s estate in order. Recto stated that the bill must be passed for people to unlock the potential of the idle assets left by the deceased so they can be used by their heirs.

Recto said that if the government had extended deadlines to distressed commercial establishments during the pandemic, “then why should not the same compassion be extended to families?”

President Marcos Jr. Cannot Avail of Tax Amnesty

The Bureau of Internal Revenue (BIR) stated during the hearing of the House Committee on Ways and Means that President Marcos Jr. avail himself of the tax amnesty program of the BIR because of his family’s alleged P 203 billion unpaid estate taxes.

BIR Assistant Commissioner Ma. Luisa Belen referred to Section 9 (a) of the Tax Amnesty Act, which provides that the tax amnesty “shall not extend to estate tax cases which shall have become final and executory and to properties involved in cases pending in appropriate courts … falling under the jurisdiction of the Presidential Commission on Good Government (PCGG).”

House Deputy Minority leader France Castro of ACT Teacher Partylist said that Marcos should set an example by paying their tax delinquencies. She also added that the Marcos administration had no moral authority to compel delinquent taxpayers when he himself and his family have taxes owed to the Filipino people.

Address the Tax Amnesty Concerns

Addressing concerns about the cumbersome process of availing estate tax amnesty, Juanito H. Balbastre III, the officer-in-charge of the BIR law and legislative division, expressed a willingness to accept applications for amnesty even in the absence of proof of settlement. He highlighted that the law explicitly allows for the removal of this requirement, citing the BIR’s Revenue Regulations 17-2021 during his remarks to the committee.

On Donor’s Tax

The committee also granted approval to a motion within the bill that would provide an exemption to heirs from paying donor’s tax if the value of the property donated by their parents is P1 million or less.

Salceda, the chairman of the House Ways and Means Committee, expressed his belief in allowing individuals who are still alive, as they are familiar with their own children, to have the authority to make decisions. He initiated the provision and supported the motion put forth by Nueva Ecija Rep. Ria Vergara. If this provision is passed by the Senate and signed into law by President Marcos, heirs will be exempt from paying the standard fixed rate of six percent if the estate’s value is one million pesos or below.

Salceda suggested this exemption as an alternative to passing these laws. The intention is to enable parents to transfer assets to their children before their time, thereby relieving the heirs of the burden of paying the donor’s tax.

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