BIR goes after dead persons

The Aquino administration will require banks to submit the bank statements of deceased persons to the Bureau of Internal Revenue, in a bid to improve the collection of estate taxes.

Bureau of Internal Revenue Commissioner Kim Henares said dead persons are not covered by the Bank Secrecy Act. “One of the exemptions from the bank secrecy law is if it’s regarding an estate. So when you die, there’s no more bank secrecy,” Henares said.

Henares said she will ask banks to submit to the BIR or if need be, subpoena the bank statements of persons who died in the last five years.

Banks require clients to report if a partner in a joint account has died.

Finance Secretary Cesar Purisima likewise said that estate tax collection is an area that can be improved in order to raise the tax effort to 16 percent by 2016, from the current level of 13 percent.

“Given the increase in asset values, we believe that the amount collected from estate taxes should be higher,” Purisima said.

In the past 10 years, the government said that estate tax collection only ranged from P850 million to P1 billion a year.

Purisima said that he has tasked the BIR to significantly boost estate tax collections to P50 billion by the end of the Aquino administration’s term.

“Commissioner Henares and I agreed that we’ll review the past five years of estate tax filing. The bank secrecy is lifted when someone dies,” the finance chief said.

“So we’ll be writing to the banks, so that they can provide us with the information that we need,” he added.

The BIR defines estate tax as the tax on the right of the deceased to transmit his or her estate to the lawful heirs or beneficiaries at the time of death.

It is not a tax on property, but a tax imposed on the privilege of transmitting property upon the death of the owner.

“We will assess the bank statements. For example, if a deceased person had P10 million in his account and it suddenly became zero, where did the money go? If it was withdrawn after his death, the bank has a criminal liability,” the BIR chief said.

“If it was withdrawn in the previous years, was it donated? Was donor’s tax paid?” Henares added.

Purisima said that this move will take a while since they will request the documents from banks nationwide.

According to the BIR website, the highest amount of estate tax that shall be paid, is P1.215 million plus 20 percent of the excess over P10 million if the net estate is P10 million or higher.

While the estate tax return must be filed six months after the decedent’s death, the BIR Commissioner may grant extension not exceeding 30 days.

Should the Commissioner find that the payment of estate tax would impose undue hardship on the estate or any of their heirs, the Commissioner may extend the time of payment of the tax by not more than five years. There could also be surcharges and interests if the estate taxes are left unsettled six months after the decedent’s death.

A few years back, Purisima said that the collection of estate taxes is low because bank managers allow the families of deceased clients to withdraw money from their accounts.

Banks and heirs of deceased clients will both be held liable should they be proven to transfer or withdraw properties of the deceased without paying estate tax.

source:  Malaya