Thorny issues in the Marcos estate tax

Published April 7, 2022, 5:38 AM

by Zoilo "Bingo" P. Dejaresco III

               The Philippines’ debt level hit an unprecedented P12-trillion and the Filipinos living under the poverty line went back to the 2017 era of 21 percent (about 23 million), mainly due to the pandemic.

                 The burden of debt servicing such a mammoth debt and providing socio-economic services to increasingly more impoverished people can cause fiscal strain, perhaps prodded President Duterte to egg BIR to “collect those estate taxes.” Of course, he did not refer directly to the Marcos Estate tax dues.

          After all, P203-B in Marcos Estate taxes in arrears (including penalties and surcharges from an original P23 billion) is no pittance. It may well be that it assumed political color these days as Ferdinand Marcos Jr. is a presidential candidate,  but regardless, election time or not, people ought to pay taxes especially if it is in these magnitudes.

               Marcos Jr. and Imelda Marcos (mother) are the named administrators of the Marcos Estate and willful failure to pay estate taxes carries with it jail terms up to 10 years. Moreover, no distribution of dividends or dissipation of assets to heirs can happen without the payment of the estate taxes on the properties, according to the Philippine Tax Code.

          Former Chief Justice Antonio Carpio says the BIR – after sending one more demand letter last December 2021- should just act and put a “levy” on those identified Marcos assets. Finance Secretary Sonny Dominguez, however, says that such a “levy”  cannot be done yet since many of the “assets” are still under litigation as to their real owners. Some are under the so-called cronies’ names.

          But people are incredulous that through all these past decades, at least some of those assets must already have been proven as to their ownership and therefore eligible for a levy. Why the indecent delay?

         Estate taxes, on the other hand, do not make a distinction about whether such assets (involved) were acquired illegally or not. Justice Carpio, moreover says that acceptance of estate taxes does not automatically make those assets legitimate, otherwise, it will provide thieves the “protection of the law” if they are ill-gotten.

           The fact that the Marcoses had been legally represented through the decades during the hearings for these estate taxes is an admission that – some, many, or most- of the specified assets are their owned properties.

          Article 8 of the Revised Penal Code  likewise says that mere payment of taxes on assets does not exempt prosecution for “illegally done activities to acquire them.” Thus, once the Marcos Estate pays for taxes covering specific assets (admitting ownership), there’s the grim prospect of being tagged for “illegally acquiring wealth” since the salary for the president from 1965 to 1986 – and having claimed no business interests – can make this huge wealth questionable as to their size and origins.

        That’s probably a semblance of a “Catch 22” for the Marcoses.

       Sec.11 of the Constitution protects the right of the state to acquire unlawful assets in order to protect the rights of their rightful owner, we must be aware.

       The Marcos camp faintly admitted the finality of the amount of P23-B of the assets in question by saying that what is still being contested are the remaining P180-B in computed penalties and surcharges. One Marcos lawyer at least cited the case of “defaulted loans” in commercial banks, as an example, wherein the borrower and the financier negotiate how to arrive at a “win-win” situation, presumably by cutting the excess charges to a lower amount. And thus collect what the client can reasonably afford.

          The issue is becoming powerful political propaganda in that a leader of a country should be the first to pay taxes since that is the lifeblood of any nation. Not doing so creates a significantly bad example to the constituents who might argue the president’s tax evasion as a basis for them not paying their taxes as well. Thus, the Marcos camp has changed its political tune lately proclaiming that “yes, legitimate taxes must be paid.”

          Former BIR chief Kim Henares (during Nonoy Aquino’s administration) admitted that even if the Supreme Court had ruled with finality in 1999 regarding the demand for the payment of the Marcos Estate Tax, the Aquino administration did not pursue the issue from 2010-to 2016 since it was grossly occupied with running after tax money from elsewhere to shore up the government finances which she said: “was left with little from the previous administration.” 

         Writing a collection letter to the Marcos Estate would have triggered a number of events that will eat up the precious and scarce executive time of the cash-strapped BIR then. Henares, however, asked why the PCGG did not collect “income taxes” from the foreclosed assets done between 1986-and 1989- but that looks like another long story.

         What appears to ordinary folks is that there is no prescription period when the government runs after taxes related to presumably “illegal wealth,” otherwise why the decades of litigation and the estate tax liabilities are still being pursued up to the present?

         What are the options for the Marcos camp? One is they can show that document of the so-called claimed agreement for “suspension of payment”  allegedly signed by the Marcoses and BIR/PCGG (Philippine Commission on Good Government) (being denied by both) with the authentication of the proper signatures.

           Two is to wait for the vindication of the so-called poll surveys and see Marcos win and sit as Philippine president. He can then appoint a friendly BIR Commissioner to dribble the issue for six years; in any case, as president, he will be immune from prosecution during his incumbency.

         Three is if the fabulous Marcos wealth is indeed true and is just stashed abroad – the Marcoses can bring them all back – pay all the relevant taxes (in arrears) needed to feed a hungry populace and then legally fight for the proper retention of the ownership of the allegedly “ill-gotten wealth” as well.

( Bingo Dejaresco, a former banker, is a financial consultant and media practitioner. He is a Life and Media member of Finex. His views here, however, are personal and do not necessarily reflect those of Finex. [email protected]).