Aquino government files first tax evasion case

Posted at 07/15/2010 6:50 PM | Updated as of 07/16/2010 5:42 PM

MANILA, Philippines - The Aquino government filed its first tax evasion case on Thursday to launch its campaign to shore up shaky revenues and cut the budget deficit by cracking down on corruption and enforcing tax collection laws.

Finance officials went to the justice department to file tax evasion charges against pawnshop owner William Villarica, who they said paid only P25,600 in income tax between 1998 and 2009, but was able to buy a P26 million Lamborghini sports car.

"We would like to inform the paying public that it's no longer business as usual and chances of being caught is higher," Finance Secretary Cesar Purisima told reporters.

"There will be no compromise under this program," he added.

Newly installed Bureau of Internal Revenue chief Kim Henares told ANC that the tax agency has been investigating Villarica since 2007, but was only able to file a criminal case against him now.

"It (the case) could have been filed earlier. There are really a lot of people being investigated for tax deficiencies, but the BIR has not historically used its enforcement powers to file criminal cases...until 2005, when we made this a program. Then it has had a roller coaster ride. In 2005, it was emphasized then it slipped down a bit, right now we are emphasizing it again," Henares said.

She was referring to the "Run After Tax Evaders" or RATE program, which did not do well under the administration of former president Gloria Arroyo.

In the meantime, Justice Secretary Leila de Lima said she was reviewing tax cases referred by the finance department, pointing to a list that had names of 16 individuals and corporations.

The Philippines had a tax collection rate of 12.8% of its gross domestic product (GDP), lower than the regional average of 16 %, the finance minister said.

"From that, it's obvious that we're losing roughly 3% of our GDP," Purisima said, putting lost tax revenues at about $5 billion a year.

The government last week raised the forecast for this year's budget deficit to P325 billion. As a percentage of GDP, the deficit was expected to be 3.9%, level with 2009, and Purisima has said that will be cut to 2 % over three years.

Purisima said criminal cases would be filed against major smugglers next week. The government was also looking into whether banks had any liability in tax evasion cases, and would also weed out corrupt state workers, he said.

"On this particular case that we filed, obviously that would take a long time, but on the minds that we can influence, the hearts that we create fear, I think you'll see an increase in revenues. That's what we're hoping," Purisima added.

He also appealed to the public to report tax cheats and smugglers, calling on "underpaid" secretaries to turn in bosses who did not issue receipts and pay the right amount of taxes. With Reuters