BIR gone haywire

A disturbing, nerve-wracking BIR issuance has just come out which will put the entire business community, again, in tenter hooks. The victory felt from the lifting of the 70% input cap as well as the remedial amnesty tax for Clark, Poro Point and John Hay locators (whose implementing rules and regulations are yet to come out), among others, sending out a clear and loud message to the world that our country is truly investor-friendly and a haven for foreign investments, turned out to be quite short-lived.

Underlying the 15-Point New Paradigm in Meeting Collection Target of the BIR under its Revenue Memorandum Circular 32-2007 (RMC/Paradigm) dated April 27, 2007, is the scary battle cry for all revenue officers to Collect at all Cost. Two points in the RMC which prominently stick out like a sore thumb are the call for expeditious resolution of all tax protests, by avoiding any prolonged and unnecessary discussions and negotiations with the taxpayers, fast tracking them to the PAN/FAN (Preliminary Assessment Notice/Final Assessment Notice) stages, summarily denying their tax protests and ultimately bringing the tax assessment process to the payment stage. Whew!

This, albeit, will either force the taxpayers to just avail of the existing twin administrative amnesty programs of the BIR, i.e. One-Time Abatement Penalty (OTAP) and Improved-Voluntary Assessment Program (I-VAP), which is point 13 of the Paradigm (hence, increasing BIR’s tax collections as intended), or to prematurely file an appeal with the Court of Tax Appeals, thus, incurring untimely huge docket fees beyond their projected and planned financial expenditures.

Another major shocking point raised in the RMC is the reversal of the devolved/delegated signing authority of BIR Regional Directors over claims for refund/tax credit certificate (TCC) as well as of the Assistant Commissioner for Legal Service who will now course its rulings to the office of the Deputy Commissioner for Legal and Inspection Group. In addition, any tax refund or credit claims involving more than P1 Million but not exceeding P10 Million will have to be coursed through the Deputy Commissioner for Operations and any amount in excess of P10M will be cleared with the Commissioner of Internal Revenue as the final approving official. In short, it’s back to pre-devolution era when more signatories and higher levels of review is the general rule rather than the exception.

This prolonged process of obtaining a valid cash refund or TCC or for that matter, securing a BIR ruling, does impact on the efficient running of business operations. Again, talking about cutting down on red tapes and professionalising the government bureaucracy, this RMC is an anathema to the latest Malacaņang policy for greater government efficiency and effectiveness in dealing with the business sector. I am referring to Executive Order No. 557 on “Establishing An Anti-Red Tape Task Force” signed by the President of the Philippines last August 8, 2006.

Although termed as the New Paradigm in Meeting Collection Target, the rest of the RMC provisions merely reiterate current BIR collection programs already, such as tax mapping and surveillance activities, Operation RATE (Run After Tax Evaders), RELIEF (Enhanced Reconciliation of Listings), but this time more intensified, as well as expanded OTAP and IVAP. Another initiative that the BIR is quietly implementing, though un-written but very much intertwined with this relentless call to collect at all cost, is the staggered utilization of tax credits as forms of tax payments. If the tax payable is P3M or less, TCCs may be utilized up to 100%; but, if the tax payable is more than P3M but less than P10M then 50% may be applied and if it is in excess of P10M, then, only 25% of the TCCs may be used as tax payment. This policy is not made official by the BIR but it is subtly being implemented through combined persuasion and personal appeal to the taxpayer.

There is no doubt that the task of the BIR to deliver almost eighty per cent (80%) of total revenue collections of the national government is indeed daunting. It is no mean task and it can turn into an almost impossible mission if the underlying assumptions for the projected collection target are not realized, whether for reasons owing to force majeure or not. However, one must always strike a proper balance between tax enforcement and voluntary compliance in order to achieve that golden mean or harmony leading to an efficient and effective tax system. Otherwise, no amount of beating can force the goose to lay the golden eggs if the former is already lame and dead. Effective partnership among the private sector and public/taxpayer and BIR is still the key to a better civilised society.