Change is also coming to the BIR

Business World (10/17/2016; p. S1/2)

SUITS THE C-SUITE By Tesi Lou S. Guanzon

Consistent with the government’s promise to provide “real positive change,” the Bureau of Internal Revenue (BIR) recently announced its key priority programs.

The BIR Key Priority Programs are grouped into four main initiatives, namely: (1) Improve Taxpayer Satisfaction; (2) Protect Revenues and Recapture Public Trust; (3) Attain Collection Targets; and, (4) Adopt an Expanded Compromise Settlement Program.

It can be seen from this list that the BIR has regarded with equal importance the goal of winning public trust and giving due regard to taxpayers’ concerns, with BIR’s function of raising revenue for the government.

IMPROVE TAXPAYER SATISFACTION

In order to attain its goal, BIR Commissioner Caesar R. Dulay has been open to hearing various concerned sectors on the tax administration reforms that should be implemented and the changes needed in the existing rules and regulations. The BIR has started to review tax rulings and issuances that tend to hinder business transactions. It also plans to recall, if warranted, revenue issuances which impose unnecessary burdens on taxpayers and create opportunities for extortion and corruption. Thus, taxpayers can expect in the near future tangible changes that the BIR hopes will contribute to the government’s aspiration to make the Philippines more business-friendly.

The BIR also aims to ease the burden of compliance for taxpayers. Taking advantage of innovations in electronic data transmission, the BIR is pushing for more “online” transactions such as taxpayer registration and electronically updating taxpayer data. Making taxpayer services available online would help address certain challenges faced by multinational companies, particularly those attempting to synchronize the implementation of changes in their global operations. Previously, in these situations, the Philippine company would tend to lag behind or worse, cause delays in executing a global project because of lengthy and complicated local processes.

By leveraging technology, the BIR can take significant steps to align the performance of Philippine tax authorities with modern trends.

The BIR is also finding ways to ease the burden of tax filing and tax payment in order to encourage tax compliance instead of it being a painful experience for law-abiding taxpayers. For this purpose, the bureau plans to expand the coverage of taxpayers who may take advantage of the Electronic Filing and Payment System (“eFPS”) beyond those registered as large taxpayers. The BIR also intends to provide taxpayers with the option to pay taxes using credit or debit cards through participating member banks.

Furthermore, the BIR is looking to streamline requirements and processing times for the application for clearances. It has, in fact, already started implementing this goal with the issuance of Revenue Memorandum Circular (RMC) No. 74-2016. This RMC directs revenue officers to process and release tax clearances within two days of submission of complete documents. These clearances are required under Executive Order No. 398 as precondition for entering into or continuing with government contract.

Moreover, under Revenue Memorandum Order (RMO) No. 041-2016, the Commissioner directed BIR officials to strictly follow the time prescribed for the BIR to take action on taxpayers’ applications and requests, and thus, certificates authorizing registration shall be issued within five days of transmittal of complete documents. This simplified and shortened process is a welcome change for taxpayers.

Another BIR requirement that has been a bane to the business sector is the processing and accreditation of brokers and importers. To address the situation, the agency is proposing an online application and processing system for the BIR clearance required for the accreditation of brokers and importers as one of the action points to achieve the BIR’s Key Priority Programs.

Finally, the BIR also plans to classify taxpayers based on business size (large, medium, small and micro) and to simplify the tax returns according to the needs of taxpayers based on its size. However, regardless of business size, the BIR’s paramount concern should be to facilitate taxpayer compliance instead of making the process complicated. Through these measures, the BIR hopes to transform tax filing and payment into an efficient and pleasant experience for taxpayers.

PROTECT REVENUES AND RECAPTURE PUBLIC TRUST

The BIR understands that enhancing the bureau’s image goes beyond addressing taxpayer concerns.

The bureau has considered as part of its Key Priority Program the pursuit of undesirable tax officers and to relieve those with unsatisfactory performance records. It is also using its internal processes (such as the Case Monitoring System) to determine violations among the ranks. By regularly monitoring the timing of the progress of audit cases, the BIR hopes to weed out erring officers.

In a statement made on Aug. 11, Commissioner Dulay asked tax examiners to explain “questionable” delays in investigation of tax cases beyond the prescribed period, which may be a source of corruption in the Bureau. Concerned revenue officers are required under RMC No. 70-2016 to submit inventory of all outstanding Letters of Authority/Audit Notices, and Letter Notices as of June 30, 2016 and to justify the reasons for the delay in closing the audit/investigation beyond the period prescribed under RMO No. 69-2010.

The BIR also issued RMO No. 54-2016 to establish a Special Disciplinary Committee for the expeditious investigation of revenue officers who failed the test of integrity, competence and efficiency in the performance of their audit functions and in the conduct of tax investigations.

ATTAIN COLLECTION TARGETS

Time and again, the BIR’s revenue goals have proven to be elusive targets. To reverse this trend, the BIR currently plans to broaden the tax base without increasing the tax rates by conducting “Tax Compliance Drives to identify unregistered taxpayers.” Compliant taxpayers have applauded this move. The challenge is now for the BIR to bring unregistered taxpayers into its fold and subject them to the same rules and regulations followed by compliant taxpayers.

The BIR is also in the process of updating real property valuation to be reflective of the current zonal valuation although it appears that the whole process is far from completion.

Amid these changes, there are two programs initiated in the past that the current BIR leadership will continue to implement: (1) the Run After Tax Evaders [RATE] Program; and, (2) Comprehensive taxpayer profiling and industry benchmarking activities.

The BIR intends to fortify the RATE program by carefully building their cases and work for their resolution in court within reasonable periods. However, taxpayers hope that the efforts to run after noncompliant taxpayers will always consider the requirements of due process instead of a witch-hunt and shame campaign.

ADOPT AN EXPANDED COMPROMISE SETTLEMENT PROGRAM

Last but not least, the BIR is considering expanding the compromise settlement program, which has been somehow sidelined in the previous administration. This is a timely effort and will give taxpayers the opportunity to amicably settle their tax liabilities and encourage closing outstanding liabilities with the BIR. The BIR, for its part, will have the opportunity to collect additional revenues from taxpayers who are willing to settle their tax liabilities voluntarily and without the necessity of judicial involvement. This presents a win-win scenario for both parties.

“Change is coming” is the Government’s mantra. As the BIR takes bold steps toward responding to taxpayers’ needs, it is envisioned that such changes will not only foster taxpayer compliance, but also improve the business environment to increase economic activity and prosperity for the country.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.

Tesi Lou S. Guanzon is a Partner of SGV & Co.