Philippines Tax Collectors Want Help From Banks

by Mary Swire, Tax-News.com, Hong Kong

23 January 2002

The Philippines Department of Finance is recommending to the country's central bank, the Bangko Sentral ng Pilipinas (BSP), that taxpayers should be required to submit their income tax returns (ITRs) to banks when applying for loans.

"We suggested to (BSP) Gov. (Rafael B. Buenaventura) if he can do it administratively to require corporate clients to submit ITRs to banks," Finance Secretary Jose Isidro N. Camacho told reporters yesterday.

"It will help in BIR's (Bureau of Internal Revenue) tax collection," he added, noting the system will help the National Government to check its roster of taxpayers as well as their tax payments.

Mr. Buenaventura told reporters, "We can make ITRs mandatory for loans in addition to audited financial statements. At present, we are already requiring banks to ask for audited financial statements before granting loans. We assume that the audited statements they submit is the same as the numbers they declare to the BIR. Otherwise, they could be guilty of falsification (of public documents)."

The Finance Department yesterday noted the recommendation would improve the collection of BIR, which contributes 80% to government's total tax collection. This year, government is relying on improved revenues to contain the budget gap within the P130-billion target. The BIR expects to collect P447 billion this year.

If the measure is implemented, businesses will have a strong incentive not to borrow in future, which may be healthy for their balance sheets, but will surely dampen investment and be highly negative for economic growth. But tax collectors never think about things like like that.

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