Self-employed professionals account for only 14% of taxes

By Prinz Magtulis (The Philippine Star) | Updated September 19, 2016 - 12:00am

MANILA, Philippines - Only 14 percent of the government’s total revenues come from self-employed individuals and professionals, burdening salary workers with huge levies which the government reiterated will be addressed.

“We have high tax rates for self-employed and professionals, yet we have a very narrow base among them,” Department of Finance spokesperson Paola Alvarez said in a statement over the weekend.

The figure has consistently gone down from 34 percent in the 1980s and down to around a fifth of entire revenues in the 1990s, she said, citing Bureau of Internal Revenue (BIR) data.

In contrast, wage earners have contributed more than 60 percent to revenues which has risen over the past three decades.

No absolute figures were provided or were immediately available as of press time.

The Duterte administration is submitting the first of four packages comprising its comprehensive tax reform program to Congress over the next two weeks for approval.

Aside from it, separate measures to relax the bank secrecy law and make tax evasion a predicate crime of money laundering are also being threshed out, Alvarez said.

These bills, she said, aim to give more power to the BIR to look into bank accounts of those with pending tax evasion cases, without the need to ask for separate permission from the courts.

“The Bureau of Internal Revenue, however, cannot fully audit them because of existing bank secrecy laws,” Alvarez said.

“In relaxing bank secrecy laws, we want to cover all types of accounts, whether they pertain to deposits or investments, or to peso and dollar accounts,” she said.

The same case is being eyed on plans to amend the country’s dirty money laws.

“We also want to include the crime of tax evasion as a predicate crime to money laundering, so we can catch the big tax evaders and haul them to court,” the spokesperson said.

Similar moves to ease bank secrecy and tighten money laundering laws have failed during the latter part of the previous administration, which has rejected outright lowering of income levies without offsetting potential revenue losses.

President Duterte has made it his campaign promise to bring down income taxes to a high of 25 percent from 32 percent for individuals, and to 25 percent from 30 percent for corporations.

According to initial figures which may still be revised, the comprehensive tax reform plan is estimated to generate net additional revenues of P368 billion by 2019.

“From now until the end of the month, we are conducting a series of consultations to further refine this proposal,” Finance Secretary Carlos Dominguez was quoted as saying in a separate statement.

BIR lifts tax audit suspension

By Prinz Magtulis (The Philippine Star) | Updated September 2, 2016 - 12:00am

 Under Revenue Memorandum Circular 91-2016, tax investigations authorized by the previous administration have been reinstated “to ensure the collection of correct taxes.” CC/Michal Jarmoluk

MANILA, Philippines - No existing tax audit has been scrapped as a result of a two-month suspension of tax investigations which the Bureau of Internal Revenue (BIR) lifted yesterday.

Under Revenue Memorandum Circular 91-2016, tax investigations authorized by the previous administration have been reinstated “to ensure the collection of correct taxes.”

“The suspension as ordered...is hereby lifted effective Sept. 1, 2016,” the circular dated Aug. 31 said.

“All field audits, field operations, or any form of business visitation in execution of (LOA)/electronic letters of authority/audit notices, letter notices or mission orders can already be conducted,” it added.

The Duterte administration suspended all existing LOA and its issuance upon taking over last July 1, saying it intends to check on the validity of the document issued when a probe is about to commence.

During the time, BIR commissioner Caesar Dulay said he received reports some investigations have taken years and have still not yet been concluded to the detriment of taxpayers.

Sought for comment, BIR assistant commissioner Marissa Cabreros said “there was no cancellation of these old LOAs.”

“But internal audit is ongoing and continuing and our revenue tax examiners with long outstanding and unreported LOAs are being asked to explain about the questionable delays...,” Cabreros said in a text message.

“Erring revenue tax examiners will be sanctioned,” she added.

The lifting comes after BIR recorded a one-percent dip in revenue collections last July, the first in seven months.

Revenues, however, were still up nine percent to P900.9 billion from January to July, data showed.

Under the circular, the agency recognized that there is a need for the bureau to have probing powers to effectively carry out its mandate of raising around 80 percent of state revenues.

“The conferred authority under the laws to the bureau for the collection of taxes, to be more effectively administered and effective, requires some of enforcement activities...,” it said.

But Benedict Tugonon, president of tax group Tax Management Association of the Philippines, said only “less than two percent” of BIR collections are being raised from audits.

This, he said, does not justify what he claimed was “harassment” being endured by taxpayers from “unscrupulous” examiners.

“If they have already attained that objective, then it’s good. If not, I hope there would be safeguards in place in favor of the taxpayer to avoid abuse,” Tugonon said in a phone interview.

Nonetheless, Tugonon said the 60-day suspension was already a “welcome development” since it looked like that taxpayers “could easily complain to the commissioner” under this new government.

Cabreros agreed. “Lifting of the ban will not give revenue tax examiners the opportunity to harass and continue their old practices because mechanisms has been set to discipline erring personnel,” she said.

“In fact, the (commissioner) is encouraging the public to report to BIR any corrupt activities, any hint or insinuation of the same,” the spokesperson said.

Revenue Regulations (RRs)
are issuances signed by the Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, that specify, prescribe or define rules and regulations for the effective enforcement of the provisions of the National Internal Revenue Code (NIRC) and related statutes

Revenue Memorandum Orders (RMOs) are issuances that provide directives or instructions; prescribe guidelines; and outline processes, operations, activities, workflows, methods and procedures necessary in the implementation of stated policies, goals, objectives, plans and programs of the Bureau in all areas of operations, except auditing.

Revenue Memorandum Rulings (RMRs) are rulings, opinions and interpretations of the Commissioner of Internal Revenue with respect to the provisions of the Tax Code and other tax laws, as applied to a specific set of facts, with or without established precedents, and which the Commissioner may issue from time to time for the purpose of providing taxpayers guidance on the tax consequences in specific situations. BIR Rulings, therefore, cannot contravene duly issued RMRs; otherwise, the Rulings are null and void ab initio

Revenue Memorandum Circular (RMCs) are issuances that publish pertinent and applicable portions, as well as amplifications, of laws, rules, regulations and precedents issued by the BIR and other agencies/offices.

Revenue Bulletins (RB) refer to periodic issuances, notices and official announcements of the Commissioner of Internal Revenue that consolidate the Bureau of Internal Revenue's position on certain specific issues of law or administration in relation to the provisions of the Tax Code, relevant tax laws and other issuances for the guidance of the public.

BIR Rulings are official position of the Bureau to queries raised by taxpayers and other stakeholders relative to clarification and interpretation of tax laws.