120-day tax amnesty now in effect

Delinquent taxpayers have now 120 days to step forward and settle their unpaid taxes without penalties and interest, soon after Gov. Juan N. Babauta signed the tax amnesty bill into law yesterday.

The governor stressed that he would not support similar measures in the future, urging delinquent taxpayers to settle their obligations during the 120-day tax amnesty period.

He said those who fail to settle their tax obligations would face stringent enforcement actions by the Attorney General’s Office and the Division of Revenue and Taxation.

Babauta said the new law aims to encourage individuals to take the initiative to submit their documents to the Division of Revenue and Taxation. The division will then come up with a plan for full payment of the delinquent taxes in a way that will not be too onerous for the individual, while enhancing the ability of the CNMI government to collect significant tax revenues during the 120-day amnesty period.

“It is imperative, however, that I set forth in unequivocal terms that, although I am confident that this tax amnesty program is necessary to address the economic realities facing individuals, businesses and the CNMI government, I will not support any further granting of any such amnesty program,” he added.

Introduced by House Reps. Oscar M. Babauta and Ray N. Yumul, House Bill 14-114 is similar to the one passed into law sometime in 2001, which provided for a 105-day tax amnesty period.

The new bill became Public Law 14-28, which took effect upon Babauta’s approval of the legislative measure yesterday.

The lawmakers said that a second tax amnesty program should be established because it is still “the most cost-effective way for the government to collect tax revenue during these difficult economic times.”

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 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 against 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 taxpayer 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 in installments if they default on its payment.