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By: Euney Marie J. Mata-Perez on August 15,2019

The news is replete with discussions on the refiling of the proposed bills for the other TRAIN Packages with the 18th Congress. However, there seems to be no discussion yet on any proposed amendment to the Bank Secrecy Act, Republic Act (RA) 1405, as amended, particularly the proposed amendments to Section 6 of the National Internal Revenue Code (Tax Code).

The Bank Secrecy Act treats all bank deposits as absolutely confidential and these may not be inquired into except: 1) upon permission of the depositor, 2) in cases of impeachment, 3) upon order of a competent court in cases involving bribery or dereliction of duty, or 4) in case the money deposited or invested is the subject matter of litigation.
The original TRAIN 1 bill proposed by the Department of Finance (DoF) included an amendment to Section 6 of the Tax Code to expand the exceptions to empower the commissioner of the
Bureau of Internal Revenue to inquire into and receive information on bank deposit accounts and other related data held by financial institutions on:

A specific taxpayer or taxpayers, upon an obligation to exchange tax information with a foreign tax authority, whether on request or automatic, pursuant to an international convention or agreement on tax matters to which the Philippines is a signatory or a party; and

Any taxpayer upon order of any competent court in cases involving tax evasion offenses covered under Section 254 of the Tax Code.

The above powers were supposed to prevail over any contrary provision not just in our Bank Secrecy Act, but also in the Foreign Currency Deposit Act (RA No. 6426) and other general or special laws. Such proposed amendments, however, did not see the light of day and were not part of the final TRAIN 1 (RA No. 10963).

The non-passage of the proposed amendments to Section 6 of the Tax Code had consequences, of course. In vetoing the General Tax Amnesty in the Amnesty Act (RA No. 11213), the President reasoned that without the provisions breaking the walls of the Bank Secrecy Act and the establishment of the legal framework for us to comply with international standards on exchange of information for tax purposes, the tax amnesty will create an environment ripe for tax evasion.

To date, we are not aware of any bill filed with the 18th Congress to reinstate the proposed amendments to Section 6 of the Tax Code, although we understand that the Department of Finance (DoF) still intends to push the measure again.

However, we learned that House Bill (HB) No.1498 was submitted to the House of Representatives on July 4, 2019 by Hon. Manuel DG. Cabochan III, proposing amendments to the Bank Secrecy Act. On the basis that a public office is a public trust, HB 1498 proposes to include as an exemption to the confidentiality of bank accounts the deposits of an elective or appointive official or employee of the government, including officers and members of the Armed Forces of the Philippines (AFP), Philippine National Police (PNP), and all uniformed officers and employees of the government-owned and controlled corporations and their subsidiaries. This proposed exemption is quite broad, as it does not even require any case to be filed before the concerned government officials, or any court order for the exemption to apply. The exemption applies because of the character of the depositor.

While the purpose of HB 1498 is laudable, and perhaps, such a broad exemption is what is really needed to keep our government officials honest and check graft and corruption, we can only hope that this proposed amendment will get our legislators’ nod.

Additional amendments are also being proposed by Senate Bill (SB) No. 634 which was submitted to the Senate on July 22, 2019 by Sen. Francis N. Pangilinan. SB No. 634 seems to propose that all deposits are no longer considered as absolutely confidential in nature, and may be examined for legitimate purposes. It expanded the exemptions to include legislative investigations, investigations by the Anti-Money Laundering Council, the Bureau of Internal Revenue, and other financial regulators, inquiry by independent auditors to provide audit services, and inquiry on accounts of deceased by his/her immediate family.

We note, however, that both HB 1498 and SB 634 still did not include the proposed amendments to Section 6 of the Tax Code mentioned above.

The call to relax our bank secrecy laws is not new. This call was heightened when funds of the Bangladesh Central Bank were diverted to private accounts in RCBC and then withdrawn. While the Anti-Money Laundering Act of 2001 (RA No. 9160) was amended by RA No. 10927 to add casinos as among the “covered persons”, no amendment to the Bank Secrecy Act has been made so far in response to such heist.

We all know it is about time that the provisions of our Bank Secrecy Act be relaxed, not just to empower the BIR commissioner to examine bank accounts in tax evasion cases, but also for the Philippines to send the message to the world that it is serious about fighting graft and corruption and in supporting transparency. However, it will take very strong political will to convince our legislators to pass any measure to relax the provisions of such Act.

What happened to the proposed amendments to Bank Secrecy Act?


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Euney Marie J. Mata-Perez

Mark Anthony P. Tamayo

Gerardo Maximo V. Francisco