BIR to go after estate-tax avoiders

Source: The Manila Times

Thursday, 19 November 2009 00:00

 

AFTER announcing high-profile campaigns against tax-evading politicians and discount bazaars, the Bureau of Internal Revenue (BIR) on Wednesday said it would begin going after heirs who fail to pay estate taxes in a new program called “Rest in Peace” or RIP. “We will have to quantify that from our experience. In the past years, estate-tax returns was small,” Joel Tan-Torres, BIR officer in charge (OIC), said, adding that benefactors already transfer their assets to their heirs even before the former pass away.

He said the tax agency would know if tax lawyers had a hand in this tax-avoidance scheme.

The new BIR chief said the name of the lawyers would be reflected in such transactions. So those lawyers would be penalized if they take part in such schemes, he added.

Although penalties remain “very minimal,” Tan-Torres said the agency would be on top of “everything when an RIP case was arising” based on the records of memorial parks and certificates from the local governments.

“We know about that scheme. So many days after, they have X-number of days to file estate tax returns. We’ll look into that immediately,” he said.

In a study titled “Tax Avoidance and Evasion Schemes on the Transfer of Real Properties,” state-run National Tax Research Institute recommended the following measures: application of a national transfer tax in lieu of the capital gains tax, donor’s tax, and estate tax; adoption of a single tax base in the computation of all taxes relating to the transfer of real properties; implementation of an effective audit of tax returns; and the stricter and speedier prosecution of offenses under the National Internal Revenue Code (NIRC) by the BIR in coordination with other concerned government agencies.

An estate tax is levied on the right of the deceased person to transmit their estate to lawful heirs and beneficiaries at the time of death and on certain transfers, which are made by law as equivalent to testamentary disposition.

As such, the estate tax is not a property levy, but is imposed on the privilege of transmitting property upon the death of the owner. The estate tax is based on the laws in force at the time of death notwithstanding the postponement of the actual possession or enjoyment of the estate by the beneficiary.

According to Section 84 of the NIRC, the amount of taxes to be paid for the transfer of property shall be computed based on the value of the estate. If the value of the estate is no more than P200,000, it is tax exempt. However, if the value of the estate is more than P200,000 but not exceeding P550,000, the amount in excess of P200,000, shall be taxable at the rate of 5 percent.

If the value of the estate is more than P500,000 but not exceeding P2 million, the tax shall be P15,000 plus 8 percent of the excess of P500,000.
LAILANY P. GOMEZ