Here’s to healthier tax disputes

Let’s Talk Tax

By Diana Elaine B. Bataller-Simbulan

The COVID-19 vaccine is just around the corner but the challenges of the first quarter must still hold our attention. The news is full of headlines on the Philippines’ budget deficit growing to a record P1.37 trillion and the debt-to-GDP ratio rising to 54.5% at the end of 2020. The increased need to address the burgeoning deficit and debt leaves the government scrambling to raise revenue.

When tax people hear the phrase “raise revenue,” they think of increased Bureau of Internal Revenue (BIR) audits and tax disputes to make up for shortfalls. Several scenarios that can pose challenges and burdens to taxpayers come to mind. Two recent challenges relate to denial of Voluntary Assessment and Payment Program (VAPP) availment and issuance of subpoena duces tecum (SDT).

In September, the BIR issued Revenue Regulation (RR) No. 21-2020 for the implementation of VAPP for Taxable Year 2018 under certain conditions. One of the objectives of the RR is to reduce the number of audit investigations by encouraging voluntary payment of additional taxes.

However, there have been situations when the BIR denied VAPP availment. One of the denials was due to non-withholding of taxes. On another occasion, the BIR attempted to deny availment on the basis of an assessment finding for disallowed expenses which translated to overstatement of expenses by more than 30%.

In the case involving alleged non-withholding of taxes, it is important to note the difference between non-withholding of taxes and non-remittance of withholding taxes. What invalidates the VAPP availment is non-remittance of taxes that had in fact been withheld by a designated withholding agent — which is akin to theft of government tax revenue. It should be noted that mere non-withholding is not grounds for invalidation.

As for the overstatement of expenses case, the regulations provide that for VAPP availment to be invalidated, there must be “strong” evidence or findings of overstatement of deductions by more than 30%. This seems to be rooted in the Tax Code provisions on fraud, i.e., that under-declaring income or overstating deductions by more than 30% constitutes prima facie evidence of fraud. However, it must be emphasized that there must be strong evidence based on facts. The burden of establishing such strong evidence falls upon the BIR.

Many taxpayers avail of the VAPP in the hope of avoiding or putting an end to tax disputes. We can only imagine them clinging on in the hope of surviving yet another audit. Invalidating availments based on questionable application of the rules undermines confidence in VAPP.

Another challenge in tax assessment cases is the issuance of SDT. To many, the mere mention of the word “subpoena” is threatening. SDT is a process directed to a person requiring him to bring any books, documents, or other paraphernalia under his control. Basically, this type of subpoena is issued for presentation of documents that are necessary for the BIR to conduct an audit.

The problem, however, is that there are instances when subpoenas are issued even when there was prior submission of documents. The usual list attached to the Letter of Authority (LoA) issued to taxpayers is a long one. At times, taxpayers can submit majority of the documents, but not all due to the sheer volume of requirements. The problem is confounded today by the fact that retrieving documents in our COVID-stricken world can be a nightmare. When would such a subpoena be deemed absolutely necessary?

Under BIR regulations, a subpoena can be issued if the information or records requested are not furnished within the period prescribed or when the information or records submitted are incomplete. The word “incomplete” may be overly broad. Some taxpayers ask whether the examiner, during the examination stage, really needs 100% of such records. Even the BIR’s Handbook on Audit Procedures and Techniques allows for sampling, which is defined as the application of examination procedures to less than 100% of the items in an account to verify accuracy.

The concern is that the subpoena needs to be used fairly. At a time when everyone’s stress levels are at an all-time high, the issuance of SDTs for questionable “incomplete” submissions may be uncalled for.

With the array of concerns about erroneous denial of VAPP and unreasonable issuance of SDTs, it is no surprise that taxpayers are wishing for an improved BIR approach and for a healthier dispute resolution process in these difficult times.

An apt reminder in raising revenues in this time of crisis is the Supreme Court pronouncement in the case of Roxas vs. Court of Tax Appeals: “The power of taxation is sometimes called also the power to destroy. Therefore, it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally, and uniformly, lest the tax collector kill the ‘hen that lays the golden egg.’ And in order to maintain the general public’s trust and confidence in the Government, this power must be used justly and not treacherously.”

Yes, taxes are the lifeblood of the nation, but the most sustainable source of increased government revenue should come from growth spurred by increased business activity, profits, and increased employment. This will not happen if we kill today the “hen that lays the golden egg.”

Diana Elaine B. Bataller-Simbulan is a manager of the Tax Advisory and Compliance Division of P&A Grant Thornton.

The Danger of Unilateral Digital Services Tax (DST)

 

Taxwise Or Otherwise

By Mac Kerwin P. Visda

While our physical movement has been limited by the pandemic, technology enables us to reach even the farthest corners of the digital world. Nearly a year under community quarantine, virtual meetings and gatherings have remained part of our everyday life. At the end of a workday, most people’s routines consist of turning to online video and audio streaming services, or clicking the add-to-cart button to shop online. Even though these online transactions were present before the pandemic, they have continued to flourish given our current circumstances. This has also heightened the intention of governments worldwide to throw the net of taxation to capture a fair share of the income earned by these online businesses.

Long before COVID-19, the Organisation for Economic Co-operation and Development (OECD) acknowledged the challenges brought about by digitalization. The OECD/Group of Twenty (G20) Inclusive Framework intends to address these challenges with consensus-based and long-term solutions. According to the OECD, without this kind of solution, the world can expect the passing of domestic and unilateral digital services taxes (DSTs). Consequently, it may produce damaging tax and trade disputes, which would undermine tax certainty and investment. And if left uncontrolled, these unilateral DSTs worldwide may start a global trade war. The OECD estimated that the failure to reach a consensus to handle the challenges brought about by digitalization could reduce global gross domestic product (GDP) by more than 1% annually. For instance, in response to France’s DST that it found to be discriminatory against US companies, the US announced that it would be levying import duties on products from France beginning January of this year. However, this duty imposition was deferred since France delayed its DST implementation. The US is currently reviewing if it can also apply the same import duties against nine other countries which have adopted or drafted DST legislation.

To work on this consensus-based solution, the G20 Finance Ministers and Leaders endorsed in June 2019 the Programme of Work that laid down a two-pillar approach in an attempt to solve this challenge. Pillar One aims to create a new nexus and profit allocation rules, while Pillar Two will provide the formation of a global base erosion mechanism. In October of the same year, the OECD Secretariat developed and published the “Unified Approach” under Pillar One.

Unhampered by the pandemic and even by their political differences, last year, the Inclusive Framework members released for public comment the Reports on the Blueprints of Pillar One and Pillar Two. These blueprints reflect their perspectives on various key policy features, principles, and parameters on both Pillars, and identify remaining political and technical issues where differences of views remain to be bridged, including the next steps to be taken to reach an agreement by mid-2021.

From only having a Unified Approach in 2019, which I considered a game-changer in the digital taxation landscape as mentioned in a 2019 article, Pillar One has now become clearer under this blueprint. In line with the Unified Approach, the Blueprint still classified Pillar One’s 11 key elements into three groups: (1) Amount A, which is the new taxing right for market jurisdictions over a share of residual profit calculated at a Multinational Enterprise (MNE) group (or segment) level; (2) Amount B, which is the fixed return for certain baseline marketing and distribution activities taking place physically in a market jurisdiction, in line with the arm’s length principle; and (3) the processes to improve tax certainty through effective dispute prevention and resolution mechanisms.

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While the Blueprint for Pillar One still has some open issues on key features of the solution, like the scope of application, amount of profit to be allocated, and extent of tax certainty, it already provides for a process map to apply the various elements in possibly computing for Amount A. In determining whether an MNE will be covered by this Amount A, global revenue and foreign-source income in-scope revenue threshold shall be used. Afterward, the consolidated financial accounts of the MNE groups will be used to compute for the profit before tax where tax adjustments, segmentations, and carry-forward losses can be applied. Upon arriving at the proper tax base, a three-step formulaic calculation (i.e., profitability threshold, reallocation percentage, and allocation key) will be applied to determine the share of an eligible market jurisdiction.

In case the MNE has a taxable presence in a certain country, the MNE can eliminate duplicative allocation of residual profit from its share in Amount A. Lastly, MNE groups should identify the jurisdiction(s) where they are required to relieve double taxation and determine the entities that have to pay Amount A tax liability through a simplified administrative procedure.

On the other hand, Pillar Two Blueprint provides a solid basis for a systemic solution that is designed to unravel the remaining issues about base erosion and profit shifting. It also laid down the rules enabling countries to have the right to “tax back” transactions where other jurisdictions have not exercised their primary taxing rights or where these transactions were subjected only to low levels of effective taxation. Despite not reaching an agreement yet, this Blueprint is a giant leap for the future agreement that would ensure that all large internationally operating businesses pay at least a minimum level of tax.

Although the Philippines is not yet a member of this Inclusive Framework, our government may consider these as positive developments since our country can be considered a large market jurisdiction for these digital products. Though there is a pending bill in Congress that seeks to impose a value-added tax on digitally supplied services including those rendered by non-resident foreign corporations, it would be good if our legislators consider the above changes in the international tax architecture in balancing our fiscal needs with the additional administrative burden it may impose on MNEs. With this in mind, we can help prevent the danger of having a unilateral DST.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.

 

Mac Kerwin P. Visda  is a Manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.

mac.kerwin.visda@pwc.com

Invalidating the BIR audit

The Bureau of Internal Revenue (BIR) has the authority to audit all taxpayers and render assessments for deficiency taxes.

During audits, the BIR effectively uses a fraction of the government’s resources against a single taxpayer. Meanwhile, the taxpayer still has to carry on his or her business operations while the audit is taking place. The balancing factor, according to the Supreme Court, is ensuring that all audits are properly authorized.

In G.R. Case No. 222743, Medicard Philippines, Inc. was issued assessments without being issued a Letter of Authority (LOA) from the BIR. This lack of adherence to due process effectively voided the assessments.

The ruling was later reiterated by BIR Revenue Memorandum Circular No. 75-2018.

To avoid being taken advantage of by corrupt revenue officers, taxpayers need to learn the process of a BIR audit or investigation, and what validates or invalidates such audit.
The BIR audit begins with the issuance of a LOA.

Prior to that, the taxpayer can be issued a letter notice to notify the taxpayer of any discrepancy in the reports. Letter notices cannot replace LOAs, and as such do not authorize further examinations or assessments.

This applies even if the letter notice already contains the exact deficiency determined via the BIR’s database. In such cases, letter notices will need to be converted into letters of authority before assessments can be issued.

LOAs need to be specific, containing which types of taxes will be audited and for what taxable year. While sanctioning the audit of all types of taxes is allowed, LOAs can only cover one taxable year. For audits of multiple years, separate LOAs need to be issued.

The LOA needs to be served to the taxpayer within 30 calendar days of its issuance, otherwise it is voided and will need to be revalidated.

Once the LOA has been issued, the actual audit can begin. The LOA will contain which documents need to be submitted to the BIR. Failure to provide the requested documents will subject the taxpayer to the issuance of Subpoena Duces Tecum.

After the audit is finished, the BIR will issue a Notice for Informal Conference (NIC), containing the taxpayer’s liabilities. The taxpayer can then contest the assessment through an informal conference within 30 days from the issuance of the notice. If the BIR is not convinced by the taxpayer’s argument, it will proceed with the issuance of a Preliminary Assessment Notice (PAN).

The taxpayer will have 15 days to respond to the PAN, and only after the said period prescribes can the BIR issue the Formal Letter of Demand (FLD) and the Final Assessment Notice (FAN).

These documents (NIC, FLD, PAN, and FAN) need to be received by an authorized representative of the taxpayer.

In the case of Mannasoft Technology Corp. vs Commissioner of Internal Revenue (CTA Case No. 8745), the foregoing documents were received by persons not authorized by the taxpayer. The Court of Tax Appeals (CTA) ruled that such receipt does not count. As such, the CTA ruled that since the documents were not received by the proper authorized representatives, the assessments issued for that audit are deemed void as well.

Further, the burden of proving that the assessments were in fact received by the taxpayer lies with the BIR. In the case of Commissioner of Internal Revenue vs Bank of the Philippine Islands (G.R. Case No. 224327), the BIR failed to prove the receipt of the final assessment. The SC ruled that, essentially, “no assessment was issued.”

There is also a 120-day period prescribed for the duration of audit, but this is apparently not part of the due process. Even if the audit were to exceed the prescribed period, it will not be invalidated.
The government needs to implement this period strictly, and limit the types of investigation based on the size of the taxpayer’s business.

Microbusinesses, which will not be able to provide much in the way of assessments anyway, should only be subjected to a tax mapping—with a one-week prescribed period. Small, medium, and large enterprises will then be liable to tax mapping, regular audits, and Run Against Tax Evaders (RATE) cases.

The audit should only last three months for small enterprises, six months for medium enterprises, and nine months for large enterprises. RATE cases could be recommended longer periods—six months for small enterprises, one year for medium enterprises, and one to two years for large enterprises.
Conducting long audits that continually drain the taxpayer’s finances hurts only the taxpayers and often used by corrupt revenue examiners. As such, violation of this period should be grounds for the invalidation of the audit.

Currently, there are still procedures that are open to exploitation. There are currently no limits to being audited, and it usually means businesses are audited yearly. If done correctly, the audit should already address all violations. The taxpayer should then have ample time to comply with regulations.
The BIR should only audit a particular business once every three years. Currently, the BIR throws around guesswork assessments, accusing the same companies over and over again.

Examiners need to be made accountable for the assessments they make. If they are not able to collect a certain portion of their imposed assessment, then they should face strict administrative measures. This would act as a safeguard against corrupt officers.

Once an audit is finished, even if it was rendered void, the BIR cannot examine those same parameters (i.e. same tax types and taxable year). In other words, the BIR has every reason to follow the due process to ensure that it will be able to collect from its investigations.

However, this does not mean that taxpayers should rely on such invalidations all the time. It should only be a last resort against harassing audits.

In the long run, it is better to learn how to avoid the discrepancies that warrant an audit in the first place. Creating a comprehensive tax plan and ensuring tax compliance are key to saving more on taxes. Without fines and penalties, businesses will be able to earn more.

 (This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or MAP.  The author is one of the 2017 Outstanding Young Persons of the World, a Move Awards 2016 Digital Mover, one of the 2015 The Outstanding Young Men of the Philippines (TOYM), an Asia CEO Young Leader of the Year, and Founding President of the Asian Consulting Group (ACG) and the Center for Strategic Reforms of the Philippines (CSR Philippines).  Feedback at <map@map.org.ph> and <consult@acg.ph>.  For previous articles, please visit )

source:  Philippine Daily Inquirer By: Mon Abrea

When the BIR validates sales activities

As the hackneyed saying goes: “Taxes are the lifeblood of the nation”. Simply put, without the needed funds it gets from taxes, government will be paralyzed to perform its basic functions. And to ensure that taxes constantly run though those government “veins”, so to speak, the Bureau of Internal Revenue (BIR) has to make sure that the “supply” of taxes do not run dry.

One of the activities that the BIR undertakes to achieve this purpose is to check and validate that taxpayers engaged in the sale of goods/services declare the proper sales income from their business activities. Just recently, the BIR, through Revenue Memorandum Circular (RMC) No. 72-2018, has provided policies and guidelines for the effective monitoring and validation of taxpayers’ sales declarations generated from the following sources:

Point of Sale (POS)/Cash Register Machines (CRM);
Special Purpose Machines (SPM);

Other Sales Receipting System Software;
Receipting/Invoicing of Computerized Accounting System (CAS), including online sales transactions; and Manual invoices/receipts/supplemental commercial documents.

The following are the salient points of RMC No. 72-2018:

The monitoring and validation of accuracy of sales (also called “Post Evaluation”) by the BIR, may be conducted simultaneously with other BIR enforcement activities, such as the “Tax Compliance Verification Drive” (TCVD), Surveillance, Inventory Stocktaking, and Tax Audit/Investigation.
An inventory of all POS/CRM/SPM and other receipting machines/software shall be taken, matched, and reconciled with the list from the BIR database. Particularly, the BIR will provide a listing of matched and unmatched machines per the BIR’s database as against the machines that are physically in the taxpayer’s place of business. In case of a discrepancy, the BIR shall issue a Letter Notice (LN), requiring the taxpayer to explain and reconcile in writing, within 5 days from receipt of the LN, why such discrepancy exists.

If needed, the service provider of the machines shall assist the taxpayer in extracting the sales data during the scheduled Post Evaluation of the BIR. The taxpayer shall submit to the BIR the extracted sales data not later than the second day of the Post Evaluation.

The BIR shall ensure that sales data is extracted and validated from all available sources, such as:
CRM/POS/Other Sales Receipting System Software/CAS;

Sales book/accounting records and manual invoices/receipts, including unregistered/expired receipts/invoices/records, if any;
All SPMs used for supplementary invoicing/receipting such as collection/acknowledgement receipt or bills
payment without corresponding principal invoice/receipt.

If the taxpayer is unable to provide the sales information/machines during the period required by the BIR to do so, the BIR will issue a Subpoena Duces Tecum (SDT) to compel the submission/presentation of such documents/machines. Note that the failure to abide by the SDT will subject the erring taxpayer to possible criminal charges.

The sales data from all sources as discussed above shall be reconciled and compared by the BIR with the taxpayer’s returns filed with the BIR, such as value-added tax (VAT) returns, income tax returns, eSales reports, and summary list of sales (SLS).

Note that under the “Tax Reform for Acceleration and Inclusion” (TRAIN) Law, any taxpayer required to transmit sales data to the BIR’s electronic sales reporting system, but fails to do so, shall pay for each day of violation, a penalty amounting to 1/10th of 1 percent of the annual net income as reflected in the taxpayer’s audited financial statements, or P10,000, whichever is higher. Should the total number of days in violation exceed 180 days within a taxable year, the BIR shall impose an additional penalty of permanent closure of the taxpayer’s business.


source:  Manila Times Column By ATTY. PEACHES ARANAS

Casualty loss

JUST recently, we saw a lot of business establishments being flooded due to intense rains brought about by tropical storm Karding and the habagat (south-west monsoon). As a result, some taxpayers may have sustained losses in the form of damage to their equipment, machinery or merchandise.
Fortunately, our tax laws take cognizance of this predicament by allowing casualty losses to be claimed as deduction for income tax purposes.  However, there are specific guidelines on the time and manner by which the taxpayers should claim casualty losses. Non-compliance with these guidelines may result in the disallowance of deduction during BIR’s audit examination.
To avoid the disallowance, it is important to know and comply with the deadline for reporting, the facts to be established and the documentary requirements for claiming casualty losses.

DEFINITION
Casualty loss refers to the complete or partial destruction of property resulting from an identifiable event of sudden, unexpected, or unusual nature, such as those arising from storm, fire, shipwreck, or other casualty, or from theft or robbery (Revenue Regulation 12-77).

REQUISITES FOR DEDUCTIBILITY
Under BIR Revenue Memorandum Order No. 31-2009, the taxpayer claiming casualty losses must comply with the following requisites:

1. The losses were incurred for properties actually used in the business of the taxpayer. The loss of assets not used in business and/or are personal in nature shall not be allowed;
2. The concerned properties must have been reported as part of the taxpayer’s assets based on accounting records and financial statements in the preceding year;
3. The amount of loss compensated by insurance cannot not be claimed as deductible loss; and
4. The deduction of assets as capital losses must be properly recorded in the accounting reports (with the adjustment of the applicable accounts).

DOCUMENTARY REQUIREMENTS
To establish the requisites, the following documents must be submitted to the BIR:

1. Sworn declaration of loss filed within45 days after the date of the event causing the loss, stating the following:
   • Nature of the event that gave rise to such loss and the time of its occurrence;
   • Description and location of the damaged properties;
   • Items needed to compute the losses (cost or other basis of the properties; depreciation allowed, if any; value of the property before and after the event; and cost of repair);
   • Amount of insurance or other compensation received;
2. The Financial Statement for the year immediately preceding the event; and
3. Proof of the elements of the losses claimed:
   • Photographs of the properties before and after the typhoon to show the extent of the damage.
   • Documentary evidence for determining the cost or valuation of the damaged properties (cancelled checks, vouchers, receipts, and other evidence of costs);
   • Insurance policy, in the event that there is an insurance coverage for the properties; and
   • Police report, in cases of robbery/theft during the typhoon and/or as a consequence of looting.

Failure to report a theft or robbery to the police can be held against the taxpayer. However, a mere report of an alleged theft or robbery to the police authorities is not considered as conclusive proof of the loss.

All documents and other evidence submitted to prove the losses shall be subject to verification by the concerned BIR office, and should be kept by the taxpayer as part of his tax records, and be made available to the duly-authorized Revenue Officer/s, upon audit of his Income Tax Return and the declaration of loss.

Weather advisories, like rainfall alert from NDRRMC, are effective tools to save lives and avoid damage to properties. Yet, loss is sometimes inevitable. For this reason, deduction for casualty loss is allowed in the computation of income tax provided that the taxpayer claiming it strictly complies with the requirements set by law and the BIR.

source:  Daily Guardian Column By: Atty. Edward G. Gialogo

Court stops BIR seizure of Pacquiao assets

The Court of Tax Appeals (CTA) has lifted the Bureau of Internal Revenue seizure orders on the assets of boxing great, Sen. Manny Pacquiao, as it directed the BIR to stop its efforts to collect P3.29 billion in taxes while the case remains pending.

Pacquiao’s legal battle, however, is not yet over as it is set to proceed to the trial stage. Pretrial conference of the case is scheduled for Aug. 30.

Citing the BIR’s “violations of rules and irregularities,” the CTA First Division ordered the bureau to “cease and desist” from implementing its final decision on disputed assessment (FDDA) dated May 14, 2013.

The FDDA set at P3.29 billion the final amount of the deficiency tax liabilities imposed on Pacquiao and his wife Jinkee for 2008 and 2009.

In a resolution dated July 27, the CTA also withdrew the tax lien annotated on the titles of the Pacquiaos’ General Santos City properties.

A tax lien prevents the couple from disposing of the property and secures it to satisfy the government’s claim for taxes.

No more bond
Moreover, the CTA spared the billionaire from the requirement of posting a bond first as a condition for stopping the BIR’s tax collection efforts.

The BIR “utterly failed to comply with necessary requirements under pertinent laws and issuances” in assessing the couple’s liabilities, read the decision signed by Presiding Justice Roman G. del Rosario and Associate Justices Erlinda P. Uy and Cielito N. Mindaro-Grulla.

Because of the irregularities, the CTA would be “dispensing the required cash deposit or bond provided under Section 11 of the [Republic Act] No. 1125.”

The CTA found “no prima facie evidence of fraud or tax evasion” established by the BIR during its preliminary investigation.

The BIR failed to show that it conducted procedures to verify and determine “the schemes employed and the extent of the fraud” on the Pacquiaos’ part, the court said.

The BIR did not even specify in its May 2, 2012, formal letter of demand (FLD) the “best possible sources” of information it used in computing their tax underpayments.

Newspaper articles
Documentary evidence presented to the CTA showed that the BIR used newspaper and magazine articles to establish that Pacquiao earned income in the United States in the form of guaranteed payouts and his cut of pay-per-view revenues and ticket sales.

The reports were not “corroborated by other more sufficient evidence” and the BIR did not at least confirm the veracity of the articles with the authors, the court said.

The BIR notices were hounded by procedural flaws, too. For one, the FLD was not even addressed to Jinkee despite being held jointly liable with her husband.

The warrants of distraint and/or levy and garnishment—which paved the way for the seizure of the Pacquiaos’ bank accounts—were found to be prematurely issued. These were dated July 1, 2013, though the couple received the FDDA only on July 2, 2013.

On giving the couple due process, the BIR failed to prove that a notice of formal conference was issued or even any record to show that the conference actually took place.

Jayson Fernandez, the Pacquiaos’ lawyer, told the BIR in a Jan. 31, 2012, letter that he only learned of the proceedings by chance and asked for it to be rescheduled, but the BIR did not reply.

It failed to show the court the protest letter where the Pacquiaos supposedly admitted that they attended the conference.

The agency also failed to justify why it included the years 1995 to 2006 in the scope of its electronic letter of authority that authorized the tax audit.

The CTA had to evaluate the validity of the BIR notices after the Supreme Court ruled on April 19, 2016, that when imposing the bond requirement, it should make a preliminary determination of whether the BIR violated the law in its tax collection efforts.

The case reached the Supreme Court because the Pacquiaos questioned the CTA requirement for them to first deposit P3.29 billion in cash or post a P4.948-billion surety bond before the stay order against the garnishment on April 22, 2014, can take effect.

In its April 2016 decision, the high tribunal said the CTA should have conducted a preliminary hearing first before imposing the bond requirement.

The Supreme Court reminded the CTA that in case of doubt, the scale should tip in favor of the taxpayer’s right to due process and equal protection.

source:  Philippine Daily Inquirer

BIR says bank deposits not included in listing of taxpayers’ assets

The Bureau of Internal Revenue (BIR) said today the instruction to revenue regional directors and other tax enforcement officials to list down all assets of individuals and businesses did not include bank deposits

The Bureau of Internal Revenue (BIR) said today the instruction to revenue regional directors and other tax enforcement officials to list down all assets of individuals and businesses did not include bank deposits.

BIR Deputy Commissioner for Operations Arnel Guballa issued the clarification as the agency finally implemented the old Revenue Memorandum Order (RMO) 26-2010 which was questioned by lawyers and accountants as violation of the bank secrecy law.

The RMO signed by then BIR Commissioner Joel Tan-Torres included the listing of the name of the taxpayer’s depository bank, the amount and account number including foreign currency.

Guballa explained the RMO has been modified to exclude bank deposits, stressing the secrecy of bank deposits which was even affirmed when Congress approved the Tax Reform for Acceleration and Inclusion Law.

However, Guballa said they will continue to issue warrant of garnishment on the bank accounts of delinquent taxpayer when the assessment becomes final and executory.

He explained the listing of assets is necessary to speed up the collection of back accounts in instances that a business collapses, or the taxpayer had gone abroad or died.

This way, Guballa said tax collection officers can easily collect tax debts when such information is readily available.

Records showed delinquent accounts have been piling up through the years involving tens of billions of pesos as many delinquent taxpayers can no longer be located.
 
source:  Manila Bulletin By Jun Ramirez