G-8 tax deal favors Philippines’ fiscal stability and fight vs. corruption

Frankly Speaking
By Frank Wenceslao

With many governments suffering from serious budget deficits and resorting to austerity measures causing violent demonstrations the recent G8 summit of rich nations held in Northern Ireland, agreed to revisit previous agreements to crack down on tax evaders by more effective exchange of financial information and to take steps toward forcing corporations to reveal their true owners. This is good news for the Philippines because the world’s eight industrialized composing the G-8 will now help poor nations by not allowing Lichtenstein, British Virgin Islands, Cayman Islands, etc. to continue as tax havens for ill-gotten wealth from the proceeds of corruption.

Poor nations like the Philippines now have a development agenda that goes beyond aid – one that links rich-country concerns over tax erosion to the misuse of development finance in the poorest countries. There are also encouraging signs that tax justice is mobilizing public opinion. President Aquino’s main responsibility now is to protect the orderly forward movement and growth across the economy’s broad front from being disrupted by unabated graft and corruption that made it impossible for past administrations to lay the basis for self-sustaining growth and accelerating national development. More importantly, however, our country has to close the loopholes and stop “creative” accounting schemes the big corporations have employed to minimize tax payments and impede economic growth.

Other international cooperation agreements such as bilateral mutual legal assistance treaty; UN Convention Against Corruption (UNCAC); like the 2008 OECD agreement on exchange of tax information between nations strengthened by the G-8 Summit; and the 2009 G-20 London Summit declaring the end of bank secrecy or tax havens are now obligated to lift the secrecy of bank accounts suspected with illegal deposits make easier now to recover ill-gotten wealth from the proceeds of corruption and more effectively fight poverty in order to help poor people help themselves out of poverty.

Of course, there’s the G-8 communique itself. If the offer of veteran tax reform advocates a year ago was made at the G-8 summit, many would have grabbed it with both hands. If implemented effectively, the pledge to move towards automatic exchanges of information between tax authorities could limit some forms of tax evasion. There are also promises to develop G-8 action plans and add pledges to move towards disclosure of beneficial company ownership, commitments to engage developing countries in information-sharing, and to support tax authorities in developing countries, and you have a reasonable package.

Also agreed are national action plans which the G-8 countries have agreed to draw up to combat tax evasion and illicit transfers. The 10 principles that guide the development of the plans are broadly the right ones, but they already underpin company reporting laws in most of the G-8 (Russia being an exception). The commitment to automatic exchange of information between tax authorities is a positive step. However, this is an extension of the tax information exchange agreements (TIEAs) that have been developed, to little real effect, under the auspices of the Organization for Economic Co-operation and Development (OECD) over the past decade.

The Philippines should therefore institutionalize a government-NGO cooperative framework to interface government and private sector efforts in fighting corruption. The assistance from the G-8 nations to get involved in the search and recovery of the remaining Marcos’ and cronies’ ill-gotten wealth and the illicit assets of current and former public officials, their family members and close associates, or the private businessmen and individuals that colluded with them during the post-Marcos years cannot be overemphasized. Long neglected by different administrations, the Philippines-United States Mutual Legal Assistance Treaty (MLAT) provides for a Philippine representative designated by the Secretary of Justice to make and receive requests of the US Attorney General pursuant to the Treaty signed in 1994 in connection with the investigation, prosecution and litigation of criminal offenses in either country. It has been proven over and over that the US justice system is faster in the adjudication of criminal offenses committed in the Philippines that may also be a criminal act under US laws.

More often than not, the evidence of violating Philippine and US laws such as RA 1379 (forfeiting to the state unlawfully acquired property of government officials and employees) and RA 3019 (Anti-Graft and Corrupt Practices Act) and the US Foreign Corrupt Practices Act (FCPA) can be interfaced and simultaneously filed in the two jurisdictions against an accused, for instance, to pressure former President Gloria M. Arroyo, ex-CJ Renato Corona, Roberto Ongpin and other “big fishes” to opt for plea bargain, make an accounting of their respective unlawfully acquired properties forfeitable to the state pursuant and negotiate on humanitarian grounds for each to keep a part of the properties whose earnings they are responsible for in order that they can keep the lifestyle they had before joining the government.

This will avoid very long Philippine legal processes which entail enormous legal cost and when the same respondent is faced with a US court suit that will cost much more than needed in the Philippines, plea bargain becomes a better choice as the wife (Marissa) of Sen. Lito Lapid did after she was convicted of currency smuggling in Las Vegas. To avoid imprisonment, she opted for a plea bargain and was sentenced of probation, fined $40,000 for attempting to smuggle this amount, and paid additional fine of $159,600 for “restructuring” her bank deposits in order that each didn’t exceed $10,000 every time. As a condition of her plea bargain, she has promised to help US law enforcers to testify against any person that may have committed similar crimes for which she was convicted.

The Ombudsman can investigate and sue Mrs. Lapid for Philippine crimes similar to what she violated in the US, e.g. money laundering, ill-gotten gains used to unlawfully acquire properties in the Philippine and USA from the proceeds of corrupt practices, etc. The US evidence can be requested to be transferred to the DOJ. Consequently, the evidence against Mrs. Lapid will implicate her husband, then Pampanga Gov. Lito Lapid, and son, Mark, who succeeded his father as governor; then Sen. Gloria Arroyo and son, ex-Pampanga vice governor and congressman; former DPWH Sec. Soriquez and then Lubao mayor, now Gov. Lilia Pineda and husband “jueteng” king Bong Pineda for forming a cabal that demanded kickbacks of up to 50% of contract price awarded to a select number of contractors .

When the Ombudsman may follow the example of Guatemala’s of ex-President Portillo who was recently extradited to US where he faces charges of corruption in office. The Ombudsman’s case against GMA and others abovementioned is for misappropriating billions of pesos of public funds for the Mt. Pinatubo Rehabilitation Project (MPRP) that included millions of dollars of US foreign aid whose embezzlement is a serious US felony not subject to statutes of limitation. Soriquez’s documents and testimony against GMA will make her suffer what happens to Portillo. The other respondents even if acquitted in the Philippines will face charges for embezzling US aid funds. The testimonies of former DPWH Sec. Soriquez and Marissa Lapid whose plea bargain obligates her to testify if asked by the US government as a condition of her plea bargain, will implicate her husband and son, Mark, both former Pampanga governors; Juan Miguel “Mikey” Arroyo, Pampanga’s former vice governor and congressman; and then Lubao mayor, now Gov. Lilia Pineda and husband “jueteng” king Bong Pineda as the co-conspirators .