12/02/2023
FOR THE SAKE OF FILIPINO FARMERS AND THE FARMLANDS THEY INHERITED, HERE'S AN ARGUMENT FOR EXTENDING THE ESTATE TAX AMNESTY LAW, KAHIT KAUNTI LANG PO
President Ferdinand Marcos Sr.'s 1972 Presidential Decree (PD) 27 [1] was a significant step towards true land reform as it allowed tenant rice and corn farmers to own the land they till.
Over half a century has passed since its enactment, so a vast majority of the original beneficiaries of this law have long since passed away. Thus, their respective successors, mostly farmers themselves, inherited these lands.
But for a transfer of land ownership to be fully consummated, the estate of these deceased tenant farmers should, among other things, settle corresponding estate tax liabilities.
Unfortunately, the successors, most of whom come from the poorest of the poor, are unaware of such estate tax requirements, may it be due to the lack of educational opportunities, the lack of government support, or simply the lack of the requisite liquidity to settle the taxes due.
Hence, there are numerous instances where successors continue farming these lands, unaware that unpaid estate tax liabilities, after the application of surcharges and interest penalties, may have exceeded the value of their land.
Take, for example, a three-hectare (30,000 sqm) piece of irrigated PD 27 farmland in North Bulacan whose decedent died on December 31, 1991. Modestly assuming a value of 30 pesos per square meter[2], the estate tax due should be about Php 54,000[3], if paid before December 31, 1992.
Assuming non-payment, let's consider a modest one-off surcharge of 25%, plus a penalty of 20% for each year until the settlement of such tax. Thus, the estate tax due in 2023, without the amnesty, would be in the neighborhood of Php 19.23 million, and that's a very modest estimate.
However, farmlands (without improvements) in the Municipality of San Miguel Bulacan (as an example) rarely sell for more than Php 400 in today's market rates so that a three-hectare lot will have an acquisition cost of around Php 12 million, meaning the estate tax liability already exceeds the acquisition cost of the lot.
While I believe that today's Bureau of Internal Revenue will not prey on poor farmers by seizing their lands, this enormous disparity between the acquisition cost and the estate tax due will host a plethora of complications. Borrowing the words of James Cameron: Hope is not a strategy. Luck is not a factor. Fear is not an option.
For example, land disputes between successors will be challenging to solve as a prerequisite to subdividing inherited land is the settlement of estate tax dues. Another example is that many of the heirs of PD 27 lands are already of advanced age and are thus vulnerable to various medical conditions that will necessitate the sale of their inherited lands. But such a sale is complicated or impractical, if not impossible, given extant estate tax liabilities.
Thus, the enactment of Republic Act 11213 ("The Tax Amnesty Act")[4] at the time of President Rodrigo Duterte in 2018 was a blessing for today's farmers, as it allowed them to settle their tax dues without fear of hefty penalties and surcharges. In many cases, allowable deductions even reduce the estate tax due to almost nil.
This initial estate tax amnesty had a period of availment until June 15, 2021. In 2020, just several months into the COVID-19 pandemic, Republic Act 11569[5] extended the availment period by two years from June 15, 2021 to June 14, 2023.
Since the extension in 2020, much of the country's resources, both public and private, were directed at combatting the coronavirus. Because of this, farmer-families who inherited PD 27 lands were still unaware of such amnesty provision or worse, the existence of estate tax liabilities in the first place.
Basic Education in the Philippines only tangentially covers topics like estate taxes. Farmers, most of whom are unable to progress to tertiary studies, typically have yet to learn that estate taxes even exist. Yes, they know of real property taxes ("amelyar") because their municipal government regularly reminds them of such. But inheritance taxes, i.e., estate taxes, are usually alien to them.
Yung lolo ko po mismo, si Tatang Doro na magsasaka, hindi po marunong magbasa yon. Hindi po niya alam yung mga ganyan. Ganyan din po ang kwento ng maraming magsasaka hindi lamang sa Bulacan, kundi sa marami pang ibang bahagi ng Pilipinas.
But for many of these farmer families, the land they inherited from their forefathers may be the only significant wealth they'll ever own. And with the looming expiration of the Estate Tax Amnesty on June 14, 2023, our less fortunate brothers stand to lose even that.
While it's true that every Filipino Citizen has the responsibility to pay taxes, the humane thing to do, in the case of our brothers and sisters who have so much less in life, is to accord them greater lenience.
In line with President Ferdinand Marcos Jr.'s aspiration of boosting the country's agricultural productivity, I believe that it's in the best interest of the State to do everything it can to empower farmers, who will arguably work more diligently if they know for themselves that they can call the land they've been tilling for decades truly their own.
As such, I strongly recommend extending the estate tax amnesty availment period by one or two years, i.e., to either June 14, 2024, or June 14, 2025. If coupled with a massive information drive on the part of the government, we can help our farmers keep their lands and allow the Philippines to take a step closer to food security.
FOOTNOTES:
[1] Presidential Decree No. 27. Decreeing the emancipation of tenants from the bo***ge of the soil, transferring to them the ownership of the land they till and providing the instruments and mechanism therefor. October 21, 1972. https://lawphil.net/statutes/presdecs/pd1972/pd_27_1972.html
[2] Per BIR Zonal Values for Revenue District Office 25B in 1991. North Bulacan (e.g. San Miguel, Dona Remedios Trinidad, San Ildefonso) belong to this revenue district.
[3] Estate Tax Rate × Total Area × Value per unit area = 6% × 30,000 sqm × 30 pesos per sqm = Php 54,000.
[4] Republic Act No. 11213. An Act Enhancing Revenue Administration and Collection by Granting an Amnesty on All Unpaid Internal Revenue Taxes Imposed by the National Government for Taxable Year 2017 and Prior Years with Respect to Estate Tax, Other Internal Revenue Taxes, and Tax on Delinquencies. July 23, 2018. https://lawphil.net/statutes/repacts/ra2019/ra_11213_2019.html
[5]Republic Act No. 11569. An Act extending the estate tax amnesty and for other purposes, amending section 6 of Republic Act No. 11213, otherwise known as the "Tax Amnesty Act". June 30, 2021. https://lawphil.net/statutes/repacts/ra2021/ra_11569_2021.html
