Written by John Edgar S. Maghinay, 16 August 2007
The BIR’s tax collection efforts had been one of the most publicised and closely-monitored issue for the past few months.
Reports say that for January to June, total tax collections amounted to P307.44 billion, still short by P45.25 billion compared with the P352.69-billion target for the six-month period. That is despite an increase of P7.59 billion in the tax collection compared to the same period last year.
According to Finance Secretary Margarito B. Teves, “Since the BIR accounts for more than 70 percent of government revenues, [its] collection performance is closely monitored not just by the financial markets domestically, but by international observers as well”.
He further mentioned that “The failure of the BIR to meet collection goals in the first half of 2007 has weakened the government’s finances with no less than the economic recovery at stake”.
Obviously, the government relies heavily on the tax collections to finance its programs and considers the current shortfall in the BIR’s collection a very serious situation. So serious in fact that different measures have been formulated to address the situation and hopefully to make a swift recovery of tax collections during the second semester.
Earlier on, then BIR Commissioner Jose Mario Bunag extended the Improved Voluntary Assessment Program (IVAP) and the One-Time Administrative Abatement program (OTAP), implemented the RATE (Run After Tax Evaders) program, and even introduced a New Paradigm in the BIR with Revenue Memorandum Circular (RMC) No. 32-2007 in the hope of boosting tax collection.
While not many taxpayers availed of the IVAP and OTAP programs and the benefits of the RATE may yet be realised on a long-term note, the BIR is hopeful that their New Paradigm in tax collection may be the immediate solution to its woes.
Highlights of the BIR’s New Paradigm are:
- Strict evaluation of all claims for exemptions, cash refunds and issuance of tax credit certificates and resolution of doubts in favor of the government;
- All periods in the audit and assessment process must be scrupulously observed as prescribed in Revenue Memorandum Order (RMO) No. 11-2006;
- All protests on preliminary assessment notices (PANs)/final assessment notices (FANs) not containing substantial issues must be immediately acted upon and summarily denied without any prolonged discussion and be brought to the payment stage;
- Intensify tax mapping operations and third party information mining;
- Priority audit to identify businesses which are apparently earning more revenues this year; and
- Intensify the development of fraud cases.
The aforementioned programs should keep the BIR examiners and the targeted taxpayers quite busy upon implementation.
The question, however, is, will these measures suffice to meet the BIR’s target for the remainder of the year?
Newly appointed BIR OIC Commissioner Lilian Hefti, also introduced new and more proactive measures. Highlights of these are:
- Review of rulings confirming tax exemptions/preferential tax treatment of taxpayers;
- Check Compliance of the top 10,000 corporations and government offices with the Withholding Tax Rules, and in particular on Income Payments to Non-residents by consulting records of the Bangko Sentral ng Pilipinas (BSP);
- Audit of 2006 internal revenue tax liabilities;
- Computer Matching of Figures of Withholding Agents with the reported figures of the Income Recipients;
- Close Monitoring/Dialogue with taxpayers with negative growth on tax payments;
- Short term Audit of VAT Returns for the first semester of 2007;
- Resolution of Industry issues of taxpayers; and Execution of a Memorandum of Agreement (MOA) with the Bureau of Local Government Finance (BLGF) for it to require treasurers to demand presentation of tax returns before renewal of business license.
For sometime, the BIR has already been issuing letters of authority (LOAs) covering taxable years 2005 and 2006 as, obviously, the BIR wants to expedite its audit of the past years and move on to more recent years.
Again, top 10,000 corporations are most likely to receive such LOAs as the BIR wants to focus on their compliance with withholding tax regulations. The BIR will surely be focusing also on VAT transactions as this is one of the areas of tax administration which they found weak as disclosed under RMO 13-2007.
Unresolved industry issues and peculiar practices will most likely be looked upon, too. This has happened to the banking industry a few years back which resulted in huge deficiency documentary stamp tax (DST) assessments and insurance industries may be next in line, following the result of BIR’s evaluation in the aforementioned RMO.
The BIR also identified professionals and individuals engaged in business as revenue source potentials. It also plans to tap/share information with other government offices to match income/expenses reported by taxpayers.
With all these tax collections measures in place, taxpayers should be more vigilant than ever in ensuring that their practices and procedures are compliant with tax regulations. Now is the time to revisit and evaluate corporate policies and be more aggressive in resolving unclear tax practices and policies.
Act on it before the BIR comes knocking at your doorsteps. Nobody wants the burden of paying deficiency taxes and the related surcharge and interest.
By and large, while tax may be an additional burden for taxpayers, proper compliance with our tax laws is expected of all taxpayers as their share in helping our economy to move forward.
