RA 9160: Tax evaders off the hook for now

Philippine Center for Investigative Journalism (Third of a series)

Click here to read Part II

Despite dire predictions, Congress passed last week a landmark anti-money laundering law, beating the deadline set by a powerful international body, the Financial Action Task Force (FATF). But unlike others who welcomed the passage of the new measure, Sen. Sergio ‘Serge’ Osmeña, one of the law’s original sponsors, is not in a celebratory mood.

"There are hidden agendas here," he said. "We had a marvelous opportunity to collect P100 billion more in taxes but now we have a situation where we’re signaling we are even condoning tax evasion."

Tax evasion was not counted as one of the 14 crimes covered by the anti-money laundering law, which provides sanctions for those who use banks to keep proceeds from the following unlawful activities: kidnap for ransom, drug trafficking, graft and corruption, plunder, robbery and extortion, jueteng and masiao, piracy on high seas, qualified theft or white-collar crimes, swindling, smuggling, electronic fraud, hijacking, destructive arson and murder, securities fraud and felony.

This omission was not surprising. After all, even the government version of the bill submitted to Congress did not include tax evasion. This was because of the objections raised in a meeting between government representatives and the influential Federation of Filipino-Chinese Chamber of Commerce and Industries.

The group, which until recently was identified with tobacco tycoon Lucio Tan, thumbed down the inclusion of tax evasion in the list of predicate offenses for fear the law would be used to harass them. The Ramos administration had slapped a P26-billion tax evasion case against Tan.

Moreover, at the Sept. 11 joint hearing of three House committees, Dante Go, president of the Chinese-Filipino Business Club, endorsed the anti-money laundering bill but only if tax evasion as an offense were to be removed. During the hearing, several congressmen assured Go that his sentiments would be considered.

To be fair, there is some basis for the businessmen’s fears. After all, over the years, corrupt revenue officials have used their discretionary powers to extort money from businessmen they accuse of tax evasion. But at the same time, the exclusion of this offense from the anti-money laundering law deprives the government of the additional powers it needs to clamp down on tax evasion and other crimes.

Thus, Ernest Leung, former chairman of the Philippine Deposit Insurance Corp., says the drafting of the law was a "pathetic waste of time and scarce resources to have labored on such a useless Act." He said the measure was passed merely to comply with a deadline, but many government officials themselves had been reluctant to pass an honest piece of legislation. The result, Leung said, is a law that represents "subservience to vested interests."

That may be true, but a review of the process that led to the passage of the law shows that legislators often behaved in unexpected ways and were motivated not solely by self-interest but by a number of other, sometimes incomprehensible, motives. Moreover, the executive department, including Malacañang, did not fight for the anti-money laundering law with as much conviction as it did for the power reform bill.

Ironically, it was Manila Rep. Mark Jimenez, an ally of former President Joseph Estrada who is facing charges of illegal campaign donations and tax evasion in the US, who lobbied for the inclusion of tax evasion in the law.

According to transcripts of the Sept. 12 House committee hearing, Jimenez said this was needed so the country could generate more revenues. He even produced a copy of the provisions of the US anti-racketeering law that listed violations of the Internal Revenue Code as the number one unlawful activity.

Jimenez said he feared that legislators might be "ridiculed" if they pass a law not recognizing tax evasion as a punishable crime because "we are cooperating with the (Chinese) businessmen."

Jimenez’s arguments did not sit well with Makati Rep. Teodoro Locsin Jr., who said including tax evasion will make the committee renege on the "assurance" it gave to the Chinese-Filipino businessmen who had attended the previous hearing.

"I don’t want to go on record as a defender of tax evaders… I just feel my sense of fair play is violated… When they (Chinese businessmen) were here, we couldn’t think of an argument for including (tax evasion) so we excluded it… they left with that assurance," Locsin said.

Jimenez, however, won over Manila Rep. Jaime Lopez who said he would talk to the Chinese- Filipino business groups to explain the inclusion of tax evasion. In the end, however, the House approved a version of the bill that left out tax evasion from the four unlawful activities it recognized. The Senate-approved bill was also silent on the matter.

Another provision that drew a lot of debates was on the agencies that will have jurisdiction over the anti-money laundering council (AMLC) that will implement the law. The inter-agency version of the bill included eight agencies – the Bangko Sentral ng Pilipinas (BSP), the Securities and Exchange Commission, the Housing and Land Use Regulatory Board, the Cooperative Development Authority, Department of Tourism, the Philippine Gaming and Amusement Corp. (Pagcor), and the Insurance Commission. This was meant to cast a wider net in tracking down the proceeds from illegal activities.

The eight "supervisory authorities" in both the House and Senate versions of the bill, however, were trimmed down to only three: the BSP, SEC and the Insurance Commission. Committee sources said there was a strong lobby not to include housing and real estate developers, cooperatives, casinos, and travel agencies from the list of entities that will be reached by the arm of the law.

House economic affairs committee chairman, Rep. Oscar Moreno admitted the authorities will not be able to trace whether the proceeds from a crime had been funneled to buy real estate, for instance, because of the limitations of the law. The only consolation, he said is that "unlike cash, which is liquid, you cannot sell land right away" to escape authorities. (To be concluded)