Purisima should retire now; leave secrecy of bank deposits law alone

Philippine National Police (PNP) four-star police general Alan Purisima has already served his suspension in connection with a plunder case involving a controversial gun license contract with a private courier service provider.  Despite having done so, Purisima has gone on leave.  He is due to retire in November this year, when he reaches the mandatory retirement age of 56.

It will be recalled that Purisima resigned his post as PNP chief in the aftermath of the Mamasapano massacre last January.  He only resigned as PNP chief; he did not resign as an officer of the PNP.  The current officer-in-charge of the PNP is Deputy Director General Leonardo Espina.  President Benigno Aquino III has not appointed a regular PNP chief to succeed Purisima, who is his close friend.

Although Purisima is no longer the PNP chief, he still outranks Espina.  It is doubtful if Espina can give any assignment, no matter how innocuous, to his superior officer.

Responding to criticism from Senator Ferdinand Marcos, Jr., Malacañang admitted that Purisima no longer has any role in the police force.  If this is so, then why is Purisima still connected with the PNP?  As correctly suggested by ex-Senator and former PNP chief Panfilo Lacson, Purisima should take the initiative and apply for early retirement.  He should not wait for his good friend, President Aquino, to order him to do so.

The news media recently reported that the Organization for Economic Cooperation and Development (OECD) has urged Congress to repeal the secrecy in bank deposits law, supposedly to strengthen the country’s tax system, and to fight tax evasion, tax fraud, and money laundering.  A certain Richard Parry of the OECD made the recommendation in a two-day workshop held in Bataan about a week ago.

Parry’s recommendation serves no practical purpose for Filipinos and the Philippine government, and will only needlessly reduce the already limited protection currently afforded by Philippine banking laws to depositors.

Taxpayers who earn fixed incomes are subjected to the withholding tax system.  Under this system, the government not only collects the correct taxes; it collects the taxes months before they are even due.  For example, income tax for 2015 which is supposed to be paid in April 2016 is now partially collected every month of 2015.  Under this system, the taxpayer does not even get to see the tax money withheld from him.

The problem of money laundering is already addressed by Republic Act No. 9160, otherwise known as the Anti-Money Laundering Act.  This law requires banks to violate their fiduciary relationship with their depositors by obliging them to report to the Anti-Money Laundering Council (AMLC) any and all suspicious transactions.  The anomaly in the law is that it requires banking institutions to perform a investigative function which government investigators should be doing in the first place.  Vice President Jejomar Binay is the latest political celebrity whose bank accounts attracted the attention of the AMLC.

To curb graft and corruption, the anti-graft law requires all government employees to authorize the Office of the Ombudsman to look into their bank accounts to ascertain if their lifestyle is justified by their income.  Employees in the private sector are not subjected to that requirement because private persons, as a rule, do not engage in graft and corrupt practices, unless they are in cahoots with corrupt government officials.

Perhaps the problem lies in taxpayers who do not have fixed incomes.  They are often suspected of padding their expenses to reduce their taxable income.  That is, of course, tax evasion plain and simple.  This problem, however, can be addressed by increase diligence on the part of accounting agents of the Bureau of Internal Revenue.

Quite frankly, the solution to these problems cannot be had from repealing the secrecy in bank deposits law.  Traditionally, Filipinos recognize a reasonable expectation of privacy in how much money they have in the bank.  Other than collect withholding taxes from savings accounts, the government is not expected to find out how much a certain individual has in terms of savings.

The secrecy in bank deposits law has been around for decades, and it is working smoothly.  Repealing it will have dire consequences for the banking industry.  Since the current interest rates on savings accounts are miserably low (around 1 to 2 percent annually), depositors will realize that maintaining a savings account open to government scrutiny is a senseless pursuit.  People will opt to keep their money at home, or put it in a cooperative, or buy negotiable securities endorsed in blank.  Those with large savings will just rent a safety deposit box and keep their money secure, albeit without interest, but away from government eyes.

In fine, the people will lose faith in the banking system.  When that happens, there will be a large-scale reduction in bank deposits, which means less money for banks to lend out.  Less money to lend will force banks to increase interest rates on loans.  Small and medium-scale enterprises will find it difficult to stay in business, and will eventually close shop.  Unemployment becomes inevitable, and its illegitimate cousins – crime and juvenile delinquency – will plague society.  Government will have to spend more public money on crime prevention and social welfare.  In the end, more taxes will be imposed on the people.

A government is supposed to work for the interests of its people.  When government is both inefficient and corrupt, and it imposes more and more needless taxes, that government encourages rebellion.  Remember, the American Revolution was fought not primarily for freedom and self-government, but mainly because of oppressive taxation by the British colonizers.

The OECD and its officials should rethink their suggestion about repealing the secrecy in bank deposits law.  If a particular system works efficiently, and has worked without any glitch for the past several decades, it should be allowed to remain.  As the saying goes, if the device isn’t broken, it need not be repaired.



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