Bill extending estate tax amnesty yrs up for plenary

By Jovee Marie N. dela Cruz @joveemarie

THE House Committee on Ways and Means approved last Tuesday the proposal extending the availment of estate tax amnesty for another 2 years.

House Committee on Ways and Means Chairman Jose Ma. Clemente “Joey” S. Salceda said his panel endorsed for plenary approval House Bill (HP) 7409. Principally authored by Speaker Martin G. Romualdez, HB 7409 seeks to extend by another two years the deadline for applying for estate tax amnesty.

The bill seeks to postpone the deadline of application from June 14, 2023, and reset it to June 14, 2025, amending Section 6 of Republic Act (RA) 11213 (as amended).

The bill covers estate of decedent/s who died on or before December 31, 2017, with or without assessment duly issued therefore, whose estate taxes remained unpaid or have accrued as of December 31, 2017.

Salceda explained that an estate tax is a tax on the right of the deceased person to transmit the estate to lawful heirs and beneficiaries.

“The easier the assets can be passed on to their productive users, the better it will be for the economy,” the lawmaker opined.

Salceda further explained that “that principle guided the first estate tax amnesty law and its subsequent extension.”

According to Salceda, “the idea was to transfer estates more efficiently and more expeditiously so that their value can be unlocked for better economic use. As blunt as this sounds: the dead cannot use or optimize assets. That task falls solely on the living,” the lawmaker said. “As many of you know, unsettled estates can leave land and other assets idle and unused for years, if not decades.”

Not an option

HB 7409 also seeks to amend the following: RA 8424 (National Internal Revenue Code of 1997, as amended by RA 10963 or Train Law); RA 11213 (Tax Amnesty Act); and, RA 11569, (An Act Extending the Estate Tax Amnesty and for Other Purposes, Amending Section 6 of RA 11213).

Under the current ecosystem, people seeking to avail the amnesty are expected to pay tax at a rate of 6 percent based on the decedent’s total net estate (or net undeclared estate if there’s a previously filed estate tax return) at the time of death.

On the other hand, if the allowable deductions applicable at the time of death exceed the value of gross estate, a minimum payment of P5,000, as the case may be, is expected.

Salceda explained that the other idea underlying an estate tax amnesty is that most estates are not liquid.

“So heirs have to come up with cash that they may not necessarily have, or part with some portion of the estate of the deceased to settle the tax,” he said. “Of course, for many estates, such as family homes or agrarian lands with liens, that might not be an option.”

Remain idle, unusable

SALCEDA said that “as a result of the difficulty of coming up with the cash to settle estates that are not liquid, many estates remain idle or unusable as collateral.”

The task of the estate tax amnesty, then, was not to collect taxes per se, according to the lawmaker.

“After all, it is a forgiveness of certain tax receivables that should have been collected—notionally, making it a revenue-eroding measure,” he said. “The task of estate tax amnesty is to unlock enough value from idle and unsettled estates.”

RA 11213 was passed to provide taxpayers immunity from the payment of estate taxes until June 15, 2021.

However, Salceda said the pandemic hampered the settlement of estates that, to begin with, is inherently challenged by family sensitivities.

According to Salceda, by enacting RA 11569, the 18th Congress extended the estate tax amnesty from June 15, 2021, to June 14, 2023, “to give people more time to settle estates.”

“We also streamlined the procedure by removing the requirement of proof of settlement in the payment of the estate tax under the same law,” he said. “Now that the extended deadline—June 14, 2023—is upon us, we are informed that this tax amnesty is yet to be optimized.”

Struggling to comply

THE lawmaker believes that many 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.”

But Salceda hopes this will be the last time the Congress extends RA 11213, otherwise “it defeats the purpose of tax compliance if violations will always be forgiven.”

The lawmaker said other steps include: simplifying the filing procedure with the option to file online; opening assistance centers in local governments; relief from the judiciary on rules for signing special power of attorney for overseas Filipino workers abroad; and, others to address the non-tax barriers to expeditiously settling estates.

The lawmaker said he is also open to supporting an “Estate Tax Amnesty helpline” by the Bureau of Internal Revenue, to provide filing support for indigent families and smaller estates.

Meanwhile, Finance Assistant Secretary Dakila Elteen M. Napao said the Department of Finance (DOF) is supporting the passage of the measure given its “laudable intention.”

“Through this bill, those with unsettled or unpaid estate taxes are encouraged to clear themselves of their obligations and transfer the property to rightful heirs and help the government increase tax collections,” Napao said.

Relief to taxpayers

NAPAO also noted that the most important purpose of the estate tax amnesty—as it would encourage settlement of estate, “is to release property of unsettled estate so that they can be made subject to business transactions—such properties after settlement may be sold, leased, and subject to joint venture agreement.”

“Such transactions will have tax consequences and then will result in tax collections for the government,” he added.

Although not a revenue measure, Napao said collections from the estate tax have reached P7.4 billion from 2019 to March 2023.

“The DOF believes that to fully achieve the purpose of the tax amnesty law, it is deemed necessary to further extend the availment of tax amnesty, so that [our] fellow countrymen [will] benefit from this, [and] also allow the government to have additional revenues to help finance infrastructure and social programs,” he said.

Meanwhile, Bureau of Internal Revenue Assistant Commissioner Maria Luisa I. Belen said the estate amnesty tax program has been an effective tool in achieving the State policy objectives of enhancing revenue administration and collections.

“Since its implementation the estate tax amnesty has proven to be successful in generating substantial revenue with billions of pesos raised. Unfortunately due to the pandemic, the estate tax amnesty was not fully utilized making it necessary to extend the program’s deadline,” Belen said.

The BIR official added that the proposed extension of the program will provide the much needed relief to taxpayers who struggling to settle their tax obligation due to financial difficulties brought by the pandemic.