MANILA: The country’s “restrictive, archaic” Bank Secrecy Law remains a major stumbling block in weeding out corruption and should therefore be amended, the head of the Bureau of Internal Revenue (BIR) said yesterday.
In an interview, BIR commissioner Kim Henares said a modified law is needed to give the state revenue collector greater access to accounts of suspected tax evaders to verify tax compliance.
Henares said the Bank Secrecy Law on peso and dollar deposits continues to hamper transparent governance and makes it more difficult for the agency to clamp down on tax evasion.
She added that the law has been a big hindrance to effective investigations into tax evasion as it has allowed tax cheats and money launderers to use banks to hide their ill-gotten wealth.
Under Republic Act 1405, also known as the Bank Secrecy Law of the Philippines, all deposits of whatever nature with banks or banking institutions, including investments in bonds issued by the government, are absolutely confidential in nature with the exception of a written consent of the depositor.
Currently, tax authorities can only gain access to bank accounts of a firm or individual through a court order.
The General Banking Law prohibits bank directors, officers, employees or agents from disclosing to any unauthorised person, without order of a competent court, any information relative to funds or properties belonging to individuals, corporations or any other entity in the custody of the bank.
Henares cited the need to break through the walls of bank secrecy to encourage individuals and corporations to become more transparent, tax compliant and accountable.
“I hope that the Bank Secrecy Law could be repealed or amended. If you’ve done nothing wrong then there is nothing to hide,” Henares said. She said the amendment of the Bank Secrecy Law has long been pushed by the BIR but the idea never really took off amid strong opposition from politicians.
Henares believes that the law, when amended or revoked, could help detect tax leakages, improve collections on income and value-added taxes, and increase voluntary compliance.
Tax compliance among self-employed professionals continues to be low as a big part of individual tax collections come from individuals whose taxes are automatically deducted from their income.
The impeachment trial of former Chief Justice Renato Corona brought to light the need to revise the Bank Secrecy Law to aid the government in investigating graft and corruption cases.
Some business groups, however, believe that bank confidentiality is crucial in maintaining public trust in the banking system, which is an integral part of the country’s economy.
The Philippines, and 20 other countries are being monitored by Paris-based money laundering watchdog Financial Action Task Force for compliance with internationally accepted standards against harbouring tax evaders.
The Philippine star
