Enhancing the BIR’s efficiency with the eTIS

SUITS THE C-SUITE By Cheryl Edeline C. Ong

Business World (07/13/2015 – p.S1/4)

Since we wrote about “The BIR Master Plan” in our Jan. 27, 2014, column, we have seen the Bureau of Internal Revenue’s (BIR) implementation of some of the action items identified in the plan. One of these is the electronic Tax Information System (eTIS) project included in the 44 priority BIR projects under the Reform Master Plan, which is aligned with President Benigno S. C. Aquino III’s “Call for Change” and directive to promote transparency and good governance in government service.

The eTIS is a Web-based application that uses a modern platform consisting of 8 functions: Taxpayer Registration System (TRS); Returns Filing and Processing (RFP); Collection, Remittance, and Reconciliation (CRR); Audit; Case Management System (CMS); Taxpayer Accounts System (TAS); Batch Architecture Module (BAM); and System Administration Management (SAM). It will replace the BIR’s 18-year old Integrated Tax System (ITS), which is costly and difficult to use and maintain.

The eTIS is envisioned to have a central database that will fully interface with, and combine information from, various BIR systems, including — among others — the electronic Filing and Payment System (eFPS) and the electronic Letter of Authority Monitoring System (eLAMS).

This project is funded by the Millennium Challenge Account – — Philippines (MCA-P), an independent US foreign aid agency. According to MCA-P, the eTIS will improve tax compliance monitoring, reduce client contact and opportunities for negotiated assessments, increase the detection of misreporting, and enhance the value of reports.

It is expected to significantly reduce the time it takes to complete a tax audit, thereby reducing the BIR’s backlog of unfinished audits. According to BIR Commissioner Kim S. Jacinto-Henares, this digitization will help the BIR obtain, track, and analyze data faster, giving them more information that can be used in refining BIR’s operations and improving revenue collection.

The eTIS will make the audit of taxpayers easier since revenue officers will be able to draw on more complete information captured in the system using TRS, RFP, and CRR. The system will also generate the reports that are currently manually prepared, including the Preliminary Assessment Notice (PAN), Final Assessment Notice (FAN), and subpoena, among others. The system is also expected to make it easier to track the most common sources of audit findings by industry.

Recently, the BIR revenue officers underwent a series of training sessions to enhance their audit skills in a computerized audit environment.

The other interesting features of the eTIS are:

· that BIR users will be able to generate reports on their own from their computers real time;
· Easier data analysis leading to more informed decisions;
· that BIR users can request online approvals from superiors; and
· that auditing decisions will be determined based on criteria, and audit cases will be assigned automatically and anonymously, leading to greater transparency and objectivity in the process. Audit candidates will be automatically selected by the system through the uploaded audit program.

Although the eTIS is an internal IT system limited to BIR use only, its implementation will have a direct impact on taxpayers, as well as on how BIR examiners conduct their audits. In particular, the implementation of the CMS will compel the BIR examiners to conduct their audits within a specified timeline; otherwise, they may face administrative sanctions. In the Large Taxpayers Service (LTS), the CMS went live this past June 18.

Through the CMS, an audit case is accessible not only to the BIR examiner or revenue officer handling the case, but also to the Group Supervisor and all other BIR officers who have reviewing and monitoring functions and access, including the Commissioner.

Also with the CMS, all case events will be tracked to enable authorized users to monitor the status of cases. The man-hours provided for accomplishment of an event encourages the completion of an audit in less time than that provided by law. For instance, while the law allows 30 days for the service of a Letter of Authority (LoA), the system sets guidelines that are shorter for the completion of this task.

In the list of pre-determined case events, the CMS sets the planned number of days for specific tasks — for example, to gather documents and returns from internal sources, five days; to gather information or data from external sources, 10 days; to conduct an audit, 150 days; to prepare reports, including schedules and narrative memorandum reports by the case officer, 5 days; to review and approve the reports, 2 days; to prepare and generate PAN, 2 days; in case of reinvestigation, to conduct re-audit, 30 days; and in case of reconsideration, to evaluate allegations, 15 days.

The system will then track how much time is actually spent completing the various events and compute variances between the planned time and actual time spent, presumably with the view of aiding in the performance review of BIR examiners.

In light of this tracking system, taxpayers under audit will be pressed for time to comply with the deadlines set by the BIR examiners for the submission of documents and information in the course of its audit. With this development, it is interesting to see whether there will still be a need to execute a waiver of the defense of statute of limitations or prescriptive period for the BIR to make an assessment.

Nonetheless, to cope with the challenges brought about by eTIS, taxpayers must be proactive in preparing their defense against the possible deficiency tax assessments by the BIR. The stricter monitoring of assessment cases leaves little room for taxpayers to delay the process. Methodical preparation is key and will hopefully make manageable the already complicated audit process.

Cheryl Edeline C. Ong is a Tax Partner of SGV & Co.