The Philippine Congress proposes heftier tax penalties for Tax Racketeering in the Philippines

The Philippines has been having issues regarding tax-related crimes throughout 2023 – leading to over PHP 100 billion in revenues being evaded, as tax estimated by tax Authorities. Thus, the Congress of the Philippines filed “House Bill No. 7653” on March 16, 2023.  The Bill was officially approved by the House Ways and Means Committee on May 9, 2023, and is set to be reviewed by the senate. It's goal is to impose heavier penalties on tax violators who practice fraudulent methods such as the systematic utilization of counterfeit receipts (ghost receipts) and other tax fraud violations. 

Proposed increased tax penalties in the Philippines

The bill aims to increase the effectiveness of the government’s current tax evasion laws by giving an update on the definition of tax racketeering by stating that it is:

“Any coordinated scheme or operation to repeatedly or consistently evade or defeat any tax imposed under this Code through the fraudulent use of receipts, returns, and other records, with a minimum amount of Ten Million Pesos (PHP 10,000,000.00) in taxes avoided or attempted to be avoided.”

Furthermore, the bill clarifies that acts of “coordinated” tax fraud will be henceforth considered a separate crime and that those “principal” to such crimes is deemed Non-bailable and will potentially be subjected to prison sentences ranging from seventeen (17) to twenty (20) years. Moreover, it was mentioned that regardless of any final decision obtained under this violation, a civil suit for the collection of taxes can still be filed against the taxpayer.

The bill also highlights individuals who can be charged for tax violations:

• Taxpayers who benefit from Tax Racketeering, including those who buy fake receipts, will be punished as accessories. Accomplices or persons that were involved in Tax Racketeering will be punished with, alongside other penalties, imprisonment of ten (10) to seventeen (17) years.
• Taxpayers who were aware of the Tax Racketeering in progress but did not participate either as an accomplice or a principal. But still took part after its commission of tax racketeering and still gained profit from it will suffer imprisonment of not less than six (6) years but not more than ten (10) years, alongside other tax penalties given by law. 
• Public officials proven to engage in such activities will also be charged as accomplices and will be punished as accomplices. They will then be perpetually disqualified from their positions in the public office.

Note that if any provisions within this bill are deemed to be either invalid or unconstitutional, the other provisions unaffected will continue to remain fully effective. Furthermore, the bill clarifies that:

“All laws, presidential decrees, executive orders, rules and regulations, and other issuances or part thereof which are inconsistent with the provisions of this Act are hereby repealed, amended or modified immediately.”