By Benedicta Du-Baladad
Posted on March 17, 2017 [ bworldonline.com ]
Can the President compromise taxes? NO. The Tax Code vests in the Commissioner of Internal Revenue (the Bureau of Internal Revenue Commissioner) the power and the authority to compromise tax liabilities. He alone can compromise taxes. Not the President. Not the Secretary of Finance.
In acts resulting in violations of the Tax Code, there are two aspects of liability involved -- the criminal aspect, and the civil aspect. These are two separate liabilities. One is not dependent on the other. A conviction of one does not imply a conviction of the other, neither is the acquittal of one a bar to the filing of a case on the other.
Thus, when we talk of tax compromise, we talk of two separate liabilities to compromise. And these are governed by separate and different rules.
All criminal violations of the Tax Code may be compromised by the Commissioner, with the exception of two instances: (a) those already filed in Court, and (b) those involving fraudulent acts. (Section 204, Tax Code)
Fraud is a willful intent to evade taxes. It consists of deception, intentional wrongdoing, willfully and deliberately done or resorted to in order to evade the payment of taxes. Fraud is a serious charge and therefore it must be actual, proven by clear and convincing evidence and never presumed.
Using fake stamps to evade the payment of excise taxes, if proven, is a fraudulent act that is beyond the authority of the BIR Commissioner to compromise. A mere signal to compromise a criminal liability for tax evasion will destroy order and discipline in the payment of taxes.
Civil liability, on the other hand, may be compromised but only on two instances -- when the assessment is of doubtful validity or when the taxpayer is financially incapable to pay the liability. Civil liability pertains to the amount of unpaid taxes plus surcharges and penalty interest that runs from 20% to 40% annually, in case of delinquency.
While the Tax Code allows civil compromises, there is a limitation as to how much the Commissioner can compromise. If due to doubtful validity, the minimum compromise rate is 40% of the basic tax assessed. If due to financial incapacity of the taxpayer, it is 10%.
Examples of doubtful validity are jeopardy (or harassment) assessments issued without the benefit of audit, or arbitrary assessments issued without any factual and legal basis. Examples of financial incapacity, on the other hand, are bankruptcy or the business has ceased to operate, or when there is impairment of capital by at least 50%, or when the taxpayer has no other source of income.
Civil cases may be compromised lower than the above rates but the approval of a collegial Board called the National Evaluation Board composed of the four deputy commissioners and the Commissioner is required. The same is true for all compromises where the basic tax involved exceeds P1 million.
Because compromises effectively condones, waives the collection of taxes, or gives away revenues belonging to the government, any tax compromise granted not in accordance with these rules is a ground for graft and corruption or even plunder.
In practice, notwithstanding the authority to compromise granted to the Commissioner, applications for compromises undergo a very strict and rigid process involving many layers of technical evaluation and approval. It is a long and tedious process, understandably, because it involves giving away government funds.
Thus, when an act constitutes a clear case of tax evasion, done willfully with intent to evade the payment of taxes, and the liability is clearly established, there is no room for tax compromise, both on the criminal aspect and the civil aspect. The taxpayer must be prosecuted and brought to court, and the amount due the government must be collected in full inclusive of penalties.
In the case of corporations, the penalty shall be imposed on the president, general manager, branch manager, treasurer, officer-in-charge, and the employees responsible for the violation. Likewise, any person who wilfully aids or abets in the commission of tax evasion shall be liable in the same manner.
The opinions expressed here are the views of the writer and do not necessarily reflect the views and opinions of FINEX.
Atty. Benedicta Du-Baladad is the managing partner and CEO of Du-Baladad and Associates (BDB Law) and president of FINEX.
By Mary Grace Padin (The Philippine Star) | Updated March 12, 2017 - 12:00am
BIR commissioner Caesar Dulay and SHFC president Ma. Ana Oliveros signed an agreement that seeks to ease the processing of the capital gains tax exemption for the transfer of raw lands intended for government socialized housing from a landowner to a community or homeowners association. File photo
MANILA, Philippines - The Bureau of Internal Revenue (BIR) is working with the Socialized Housing Finance Corp. (SHFC) to facilitate the processing of tax exemptions for the government’s socialized housing projects.
BIR commissioner Caesar Dulay and SHFC president Ma. Ana Oliveros signed an agreement that seeks to ease the processing of the capital gains tax exemption for the transfer of raw lands intended for government socialized housing from a landowner to a community or homeowners association.
The tax exemption is compliant with the provisions of the Community Mortgage Program under Republic Act 7279, also known as the Urban Development and and Housing Act of 1992.
Under the agreement, the BIR will streamline, facilitate and prioritize the processing and issuance of the BIR certificate of tax exemption for the transfer of raw lands.
The BIR shall also provide the corresponding assessment for the documentary tax stamps of the CMP projects.
SHFC, for its part, will endorse the community or homeowner association tax exemption application for CMP projects to the BIR and assist in the evaluation, verification and certification of documentary requirements through its authorized officers.
Both parties also agreed to hold regular consultations, monitor the effectiveness of procedures and address possible bottlenecks in the processing of the tax exemption.
Oliveros said the MOA signing was timely as March is the Women’s and Urban Development Housing Act Month.
Let’s Talk Tax
By Marie Fe F. Dangiwan
Posted on March 07, 2017 [ bworldonline ]
According to news reports, the House of Representatives approved on third and final reading two tax bills: House Bill (HB) No. 4814 proposing an estate tax amnesty, and HB 4815 which calls for a single lower estate tax rate. Our congressmen unanimously passed the bills. HB 4814 garnered a vote of 216-0-0, while HB 4815 received a vote of 219-0-0.
File photo of taxpayers at the Bureau of Internal Revenue in Quezon City -- BW FILE PHOTO
Under HB 4814, the proposed tax amnesty covers estate taxes for taxable years 2016 and prior periods. A person who wishes to avail of the amnesty will pay 6% of the net estate within two years. In addition, the amnesty is designed to free up properties which are tied up due to unsettled estate tax.
As mentioned by a proponent of the estate tax amnesty law, “The primary cause of the inability to settle estate tax is due to high estate tax rates and, secondly, the inability to cope with the penalties that have accrued. In 95% of the cases, the penalties are even higher than the value of the properties.”
Capturing these concerns, the proposed tax amnesty law also seeks to grant the following immunities and privileges to taxpayers who avail of the planned amnesty: taxpayers will be immune from estate taxes, civil, criminal or administrative penalties; estate tax amnesty returns for 2016 and prior years will not be admissible as evidence in judicial, quasi-judicial, or administrative proceedings; and books of account and other records of the taxpayers for the years covered by the amnesty will not be examined. These are definitely welcome proposals to the heirs who were not able to completely declare the estate that they inherited for tax purposes. Please note, however, that in the proposed bill, the amnesty does not apply to: (a) those with pending cases falling under the jurisdiction of the Presidential Commission on Good Government; (b) those cases involving unexplained or unlawfully acquired wealth or under the Anti-Graft and Corrupt Practices Act; (c) those cases filed in court involving violations of the Anti-Money Laundering Law; (d) those criminal cases for tax evasion and other criminal offenses and the felonies of fraud, illegal exactions and transactions, and malversation of public funds and property; and (e) Tax cases subject of final and executory judgment by the courts.
On the other hand, HB 4815 suggests a single estate tax rate of 6%. Currently, the estate tax rates depend on where the value of the net estate falls. The schedule is below:
Thus, if someone were to die now under the current estate tax rates, and the net estate is P10 million, the heir would have to pay an estate tax of P1,215,000. On the other hand, given the same net estate, once the single rate of 6% is passed into law, the tax is only P600,000 (P10,000,000 x 6%), a difference of P615,000.
An even bigger impact would be on a net estate or P50 million, where the savings could be as high as P6,215,000. That’s a huge amount!
HB 4814 and HB 4815, if passed into law, would also be an opportune time for those who have yet to register the properties that they inherited from their deceased parents or relatives. These heirs often encounter problems, as they cannot readily sell or dispose of their properties simply because it remains registered under the names of the deceased. That’s because before a property is registered under the name of the heirs, the estate tax has to be paid first. Paying the estate tax means the declaration of all the properties of the deceased and the corresponding payment of the correct estate taxes on all the declared properties with Bureau of Internal Revenue (BIR).
Hence, if there is an amnesty estate tax law and a lower estate tax rate, these would help the heirs in facilitating the BIR requirements to eventually expedite the registration of the properties under the heirs’ names.
So for those who would like to be relieved from estate tax and those who would like to sell their properties, keep your fingers crossed that HB 4814 and HB 4815 are approved into law.
Interestingly, the estate tax bills appear to be moving faster than the long-awaited bill on the reduction of income tax rates. Of course, we would love to have higher take-home pay so that we can enjoy the fruits of our labor while we are alive. Higher take-home pay definitely means having extra money to travel with the family, to invest or save, or to build a dream house. We hope the income tax bill comes soon. Nonetheless, developments on the estate tax front seem like a turning point in providing relief for taxpayers.
Marie Fe F. Dangiwan is a manager with the Tax Advisory and Compliance division of Punongbayan & Araullo. P&A is a leading audit, tax, advisory and outsourcing services firm and is the Philippine member of Grant Thornton International Ltd.
Posted on March 02, 2017 [ bworldonline.com ]
THE Department of Finance (DoF) wants a direct subsidy instead of tax exemptions for building materials used in socialized housing projects, citing the potential for massive leakages from the current “imperfect” tax system.
A 2008 AFP file photo of a low cost housing project in Davao City.
Senate Bill 3776, introduced by Sen. Maria Lourdes Nancy S. Binay, aims to lower the cost of socialized housing through exemptions from value-added tax (VAT) on construction materials.
“By eliminating Value-Added Taxes imposed on construction materials including lease of equipment for socialized housing as well as housing projects for disaster victims; it is hoped that we are able to contribute to this objective of making available housing for all,” said Ms. Binay in the bill’s explanatory note.
However, Finance Undersecretary Karl Kendrick T. Chua said that the proposal is not the most viable option in easing housing access for the poor.
“We recognize the need to provide housing for the poor and the vulnerable... but we do not think the VAT system and exemptions provided to housing is the way to go, because we are concerned about the [leakages],” said Mr. Chua
He added that it is “very difficult” to conduct a proper tax audit on the VAT exemption.
According to Mr. Chua, the government only collects a third of the 12% VAT.
Mr. Chua said that the value added tax (VAT) system needs to be simplified to be able to conduct proper audits and avoid leakages, while directly transferring incentives for socialized housing through budget allocations.
“The policy recommendation we have is to simplify the VAT system, and to use the budget side precisely to help the poor and vulnerable and we will commit to work with the housing agencies to provide suitable subsidies to directly target those instead of using the VAT system, [because] it’s really complicated,” he said.
The DoF is targeting an expansion of the VAT base by removing some exemptions outside food and health, through the first package of the tax reform program currently being deliberated in Congress.
Low-income households will however be cushioned from this by the adoption of a higher VAT threshold of P3 million from the P1.9 million on the gross sales of small-scale businesses.
It also aims to limit the VAT zero-rating to those direct exporters who actually ship the goods outside the country.
The House Ways and Means committee expects to furnish a committee report of the tax reform program -- or the Tax Reform for Acceleration and Inclusion -- before the March 17 adjournment of session. -- Elijah Joseph C. Tubayan
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.