The taxman cometh not

On Valentine’s Day morning in 1929, seven men affiliated with Chicago mobster George “Bugs” Moran were lined up along a wall inside a garage in the city by four men, two of them in police uniform, and sprayed with machine gun and shotgun fire.

Due to fortuitous events, Bugs Moran missed what was dubbed as the St. Valentine’s Day Massacre. But his rival was seen as the mastermind: Al Capone, America’s most powerful mobster known as Scarface, later described as Public Enemy No. 1.

No one lived to tell the tale and Capone, who was in Miami, Florida during the murders, never faced charges related to the massacre. And although he was widely suspected to have ordered mob hits during his crime spree, he was never indicted for murder.

In his heyday at the height of Prohibition, Capone’s crime syndicate was believed to be netting a whopping $100 million a year from bootlegging, gambling and prostitution, allowing him to buy off jury members, cops and other public officials.

As is widely known, the US government succeeded in pinning him down – for tax evasion. Charged with 22 counts of failure to file federal income tax returns, he was found guilty on several of the cases in October 1931.

Capone was sentenced to 11 years, fined $50,000 (over $917,000 at current value, according to the 2022 inflation calculator) and ordered to pay $215,000 in back taxes (today over $3.9 million).

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I remember this bit of history (and it’s not revisionist) not just because today is Valentine’s Day, but also because tax dodging has become a hot topic following the declaration by the Commission on Elections (Comelec)’s First Division that failure to file income tax returns or ITR is “not inherently immoral.”

The phrase is part of the Comelec division’s ruling junking three more petitions to disqualify Ferdinand “Bongbong” Marcos Jr. from the presidential race for offenses related to his failure to file his ITR from 1982 to 1985, when he was an official of his home province Ilocos Norte and his father had the country under dictatorial rule.

As a result of the Comelec ruling, there are rumblings of civil disobedience through a tax boycott.

Finance Secretary Sonny Dominguez, whose department has supervision over the Bureau of Internal Revenue, seemed concerned enough to stress, in response to media questions, that people must pay proper taxes, as provided by law.

The rumblings must have prompted the Tax Management Association of the Philippines (TMAP) to issue a statement over the weekend, reminding taxpayers that under Section 255 of the 1997 Tax Code, failure to pay taxes, submit ITR and supply accurate information about taxable income can lead to a fine of P10,000 and imprisonment of up to 10 years.

A common reaction to the warnings from Dominguez and the TMAP is: sure you’ll be punished… unless you’re Bongbong Marcos. Another common reaction: death and taxes are certain in this world, except in the Philippines.

Marcos’ DQ cases will still go all the way to the Supreme Court, where several members might soon be blessed with a magnificently comfortable retirement.

At least the Comelec ruling of Commissioners Aimee Ferolino and Marlon Casquejo might raise public awareness of tax issues – specifically, how the obscenely wealthy can get away with not paying the right taxes, while working stiffs see the government automatically collecting a hefty cut from their take-home pay.

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A tax boycott? For many people, it’s impossible; the tax payments are automatically withheld.

The withholding tax is on top of the value-added tax we automatically pay for practically everything, from our cell phone and internet expenses to food, medicine and any merchandise that comes with an official receipt. We pay VAT for every glass of water we drink, every click of a light switch, every galunggong we fry on an LPG-fueled stove.

The Marcos tax issue should be used by certain groups as an opportunity to raise mass awareness that all of us are taxpayers because of VAT, and taxpayers have a right to see their hard-earned money utilized honestly and efficiently.

Jeepney drivers are bemoaning that because of soaring fuel costs, plying their routes has become a losing proposition. They should be reminded that 12 percent of the fuel price is value-added tax, imposed for the first time on petroleum products by the Duterte administration.

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With high awareness of how much even the poor are made to pay to the state in the form of VAT, people should demand good governance from public officials. And there should be outrage when taxpayers see those elected or appointed to public office stealing or misusing public funds, especially in this pandemic when the country is mired in P11.73 trillion of debt.

Currently, there is abysmal public awareness of the taxes we pay and where the taxes go. There is hardly any awareness of how the wealthy with their topnotch accountants can get away with not paying proper taxes.

The happy situation of wealthy tax dodgers in our country is best summed up by New York hotelier Leona Helmsley, dubbed the Queen of Mean. She infamously declared, “We don’t pay taxes. Only the little people pay taxes.”

Fortunately, a jury disagreed with Helmsley, and sentenced her in 1989 to 16 years in prison for multiple tax offenses. Her prison sentence started on April 15 – Tax Day in the United States.

In our case, our failure to punish people for tax avoidance may have been summed up by Al Capone, as he fought off the tax cases against him: “They can’t collect legal taxes from illegal money.”

The difference is that the Americans proved Capone wrong.

In the Philippines, he could have become president.