AGO vows to run after tax delinquents

If tax evaders fail to settle their unpaid taxes within the 120-day tax amnesty period, attorney general Pamela Brown wants them prosecuted criminally, including those who owe the CNMI government hundreds of thousand dollars.

CNMI chief prosecutor David Hutton said Brown has given him instruction to seriously focus on tax evasion cases, as the CNMI scrambles to raise sources of revenue in the next fiscal year.

Hutton revealed that his office has almost completed investigating at least four major cases of tax evasion, where each of the tax evaders owe the CNMI government several hundred thousand dollars. He said the four are among the CNMI’s top 15 tax evaders.

Hutton refused to disclose their identities pending their possible compliance during the tax amnesty period. The chief prosecutor, however, threatened to lodge criminal charges against them if, after the tax amnesty period and reasonable time expires, they still fail to settle unpaid taxes.

Last week, Gov. Juan N. Babauta signed House Bill 14-114 into law, which provided for a 120-day tax amnesty period wherein delinquent taxpayers could pay taxes with waived interests and charges.

In signing the bill that became Public Law 14-28, Babauta stressed that he would not support similar measures in the future. The governor urged delinquent taxpayers to come forward and settle unpaid taxes now.

The new law increased the government’s project revenue for the next fiscal year by some $2.1 million, raising the CNMI’s budgetary resources to almost $215 million.

The new tax amnesty applies to all taxes for all tax years prior to 2004, including taxes on wages, salary or earnings; gross revenue; room, bar, and jackpot taxes; and excise taxes. The law allows delinquent taxpayers to settle unpaid taxes by filing special returns with the government.

It does not apply, however, to those who are party in a civil or criminal tax action, or anyone who has not fully paid a civil or criminal judgment against them.

The law mandates the Department of Finance to make available special returns within 15 days. A properly filed special return and full payment of the tax owed releases the payer from all penalties and interest charges, which shall be deemed waived.

“Where a special return is properly filed but payment of less than 100 percent of all tax owed thereon is made to the CNMI government, 100 percent of the penalty shall be waived along with that portion of the interest attributable to the principal paid with the special return,” the law states.

It provides, however, that the taxpayer should first enter into an agreement with the Revenue and Taxation director for the payment of the remaining balance and interest charges, based on the payer’s ability to pay.

The law grants immunity to those who would properly file special returns based on the amount declared on them. Immunity may not be granted on any person against whom a criminal or civil action has been initiated and is pending for any violation of tax laws; who is being investigated or has been convicted of tax fraud; whose source of income is illegal; or who fraudulently files a special return.

The law also empowers the government to collect on penalties and interests that would be forgiven during the tax amnesty period if the tax payer fails to file a return or pay a tax due for two or more consecutive periods and has failed to timely contest the liability in an administrative or judicial proceeding.

Other instances that may effectively nullify the condonation of penalties and interests include the filing of returns or payment of taxes six months or more late from the due date, if concerned taxpayers fail to timely contest the liabilities.

The law also provides that waived penalties and interests may be reassessed on those who will pay their taxes on installment, if they default on its payment.