House committee approves amnesty for estate tax

The House Committee on Ways and Means has approved two bills that aim to improve estate tax collection by granting tax amnesty and lowering the tax rate of the Bureau of Internal Revenue (BIR).

A news release said the committee headed by Quirino Rep. Dakila Carlo Cua has approved these bills before Congress adjourned last December:

• House Bill (HB) 1889 by 3rd District of Iloilo Rep. Arthur Defensor, and
• HB 3010 by Deputy Speaker and 2nd District of Marikina City Rep. Romero Quimbo.

According to Quimbo, HB 3010 seeks to make tax amnesty a means for the government to generate more revenues.

Quimbo explains that only a small percentage of the tax collections of the BIR came from estate taxes.

The BIR refers to estate tax as “tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death and on certain transfers, which are made by law as equivalent to testamentary disposition.”

“After deducting the registered estate taxpayers from the total deaths in 2013, data show that 94 percent did not file the required estate tax return. Even if the estate is exempt from taxes, the filing of a return is still required under the National Internal Revenue Code (NIRC),” Quimbo said.

“Just looking at the number of deaths that year and looking at the estate tax filing, which is needed to be filed over a 120 day period, less than 7.2 percent actually filed for estate tax filings with the BIR,” he added.

Moreover, Quimbo noted that penalties and interests are imposed on taxpayers if they fail to file estate tax return within six months from the date of death and the tedious process of tax filing and payment.

“This results in a situation wherein the heirs of the deceased resort to non-compliance of the law’s requirements, hindering them from using these properties," he said.

"Thus, the decedents’ properties become idle and unproductive, providing a disincentive to the heirs, as well as to the economy, given the potential income that can be derived from these stagnant properties,” Quimbo said.

However, Quimbo argued that only 2.69 percent of the total collection of the BIR came from taxes on property, including estate taxes.

With this, he said the government does not generate revenue from these properties and the heirs are not productively using the said properties.

“To unlock this impasse, HB 3010 bill seeks the grant of tax amnesty for all unpaid estate taxes at the time of the bill’s passage, as well as those which shall be due three years from the time of its enactment. It proposes a revised schedule of tax due for each estate to encourage the declaration of tax returns and payment for non-compliant estates,” Quimbo said.

Meanwhile, Defensor said his HB 1889 aims to replace the current “high and unreasonable” tax base for estate taxes.

“This is a bill which seeks to provide a compelling reason for the settlement of unsettled estates right now with the end view of releasing into commercial circulation the properties which are tied up to unsettled estates, which we as authors, believe are in the billions already. So this is an amnesty and an administrative clean up measure,” Defensor said.

If passed into law, the bill will result in more subjects of taxation and generate more taxes in the long run, Defensor said.

This is possible because properties will be released into commercial circulation and open to business transactions.

“This bill, in order for it to materialize, must be simple and straightforward. This cannot succeed alone, it needs a more comprehensive effort and initiative by the Executive branch in particular, the Department of Finance (DOF) in order to succeed,” Defensor said.

For its part, the National Tax Research Center (NTRC) showed support for the two bills.

“We support the tax amnesty as mentioned by the authors. This will encourage settlement of estates and transfers to the heirs,” said NTRC Executive Director Trinidad Rodriguez.

“The properties of decedent may be sold, maybe leased, or subjected to other transactions which will later generate taxes. This will stimulate the property market as well as the economy and consequently increase government revenue,” she added. — Erwin Colcol/VVP, GMA News