, July 9 , 2004
By Des Ferriols  -  After shooting down the proposed shift to gross income taxation, the International Monetary Fund (IMF) has rejected the tax amnesty program being floated by lawmakers.

The IMF wrapped up its annual post-program monitoring (PPM) review last week, holding final meetings with finance, economic and monetary officials to make its recommendations.

Officials involved in the meetings disclosed yesterday that the IMF was opposed to the idea of offering yet another tax amnesty to delinquent taxpayers.

A high ranking government source said the IMF supported the initial opposition of the Department of Finance (DOF) which has rejected the tax amnesty from the very beginning.

The DOF reported that government has had little success with its past tax amnesty programs, collecting no more than P1 billion worth of backtaxes from delinquent taxpayers who agreed to come out and avail of the amnesty program.

Congress has been toying with the idea of another tax amnesty program since December 2003. If approved, it would be the 16th amnesty program in 14 years.

"Every time the government does it, its always intended to encourage tax evaders to settle their arrears and become compliant," the official said.

"But the DOF history and experience as well as the experience in the rest of the world has shown little or no success. It always fails," he added.

Sources from the DOF said that tax evaders have had little incentive to come forward and begin paying their taxes because the government was never serious about going after tax evaders in the past.

In last year’s PPM report, the IMF already slammed the idea of a tax amnesty program, saying that while struggling to get Congress to pass its key revenue measures, the government should resist proposals for new tax amnesties "given the harmful impact that repeated amnesties have on incentives for taxpayer compliance."

"The IMF is generally cautious about amnesties and our recommendation was based on this basic caution," the IMF said.

According to the IMF, tax amnesty programs have pre-requisite infrastructures, particularly in the generation and organization of information.

"Unless carefully designed and supported with strong information infrastructure, tax amnesty programs could give rise to disincentives to taxpayers," the IMF said.

Sources also disclosed the IMF believed the government is not doing enough to reduce its expenditures, thus compounding its inability to reduce its growing budget deficit.

The IMF review team expressed concern about the current budget deficit which is equivalent to 4.2 percent of gross domestic product (GDP) and the projected reduction of the said deficit to just 3.6 percent of GDP by next year. According to sources, the IMF review team wants to see a program or a plan that would require more deficit reduction.

In fact, sources said, the IMF expressed the view that the Philippines’ budget deficit as a percentage of GDP should be kept to just 2.5 percent. –with Marianne V. Go

Reported by: Sol Jose Vanzi

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