Lunes, Nobyembre 16, 2015

APEC and Philippine taxes for investors

We have been expecting for a couple of months now the Asia-Pacific Economic Cooperation (APEC) meeting which shall be held tomorrow. The government has been prepping more than ever. It is all over the news how the authorities plan the use of the streets to pave the way for the arrival of guests. New bollards have been installed in our main thoroughfares, not to mention the closure of some roads and re-routing. And of course there is the creation of Mabuhay Lane and APEC lane. Passing through EDSA every day and being caught up in the various dry runs, I can make out this event to be a really big deal.

During one of the dry runs, I was caught in terrible traffic and almost missed one of my important appointments. Of course, I blamed it on the summit. What’s behind this event? Well, as the name suggests, it is a meeting of heads of economies within the Asia-Pacific Region for the purpose of uplifting the economic welfare among members. This also means that APEC leaders will help determine policies and agreements that will promote progression of free trade and cross border investments among the members. Every economy is interconnected and there are no more hermits.

A couple of ads on a global news channel promote more investment in the Philippines. The tagline of the ad is “Your investment, our people”. Truly, the Philippine’s most promising asset is its people. Our country boasts a wide range of skilled and professional workers with high levels of technical knowledge and English proficiency.

For more than two decades, our government has constantly improved the investment environment to entice both foreign and local investors. Among the more prominent measures are the creation of economic zones and the liberalization of trade. We know that more investment will bring more jobs. More job means more taxes, which in the end will make it truly more fun in the Philippines.


Foreign Investors. On the tax side, when a foreign investor sets up a corporation, it is by default exposed to the regular corporate tax rate of 30%. Aside from which, a corporation is also required to withhold taxes for certain income payments. It can also be required to remit 12% value-added tax (VAT) on its sale of goods and services in the Philippines.

Depending on the type of activity, foreign-owned enterprises may register with the Philippine Economic Zone Authority (PEZA) or Board of Investments (BoI). The government awards both fiscal and non-fiscal incentives to these entities.

Among the fiscal incentives that can be granted to a PEZA- or BoI-registered enterprise is the income tax holiday (ITH) for the first four years of operation. This means that the entity is exempt from paying income tax on its registered activities. For a PEZA-registered enterprise, after operating for four years under the ITH regime, the registered entity may transition to a special tax incentive of 5% gross income tax (GIT) in lieu of national and local taxes.

In general, PEZA entities are subjected to 0% VAT on its sales and purchases. BoI enterprises which are engaged primarily in export are likewise entitled to 0% VAT on the sale of exported goods or services. However, for purchases of local goods or services of BoI entities, the rate is 12% VAT. Input VAT attributable to VAT zero-rated sales may be refunded or claimed as a tax credit certificate (TCC), but the claimant must be warned that the refund or credit process involves significant documentary and technical hurdles.

Other fiscal incentives for both PEZA and BoI enterprises may include, subject to certain conditions, exemption from taxes and duties on importation of raw materials, capital equipment, machinery and spare parts; and exemption from wharfage dues and export tax, duty, impost and fees.

The above discussion merely provides a glimpse of what a foreign investor can expect when doing business in the Philippines. It would be best to ask experts or consultants for a more detailed discussion on the prospective investment.

Local Investors. Local investors benefit as well from liberalized trade between APEC nations. From the tax perspective, local investors engaging in the export of goods or services may also opt to become a PEZA- or BoI-registered entity, and be entitled also to tax incentives granted by those agencies.

Nonetheless, even if an enterprise is not registered with the incentive-granting agencies, export sales may still be subject to 0% VAT. Note again that the excess or unutilized input VAT attributable to VAT zero-rated sales can be refunded or claimed as a tax credit, subject to documentary and technical requirements, as previously mentioned.

With the upcoming APEC event, we expect our President to lay on the table the many advantages of investing in the Philippines. We are expecting as well that by enticing investors to fund enterprises, our State, through our regulators, will consistently abide to its promises by making regulatory processes less complicated and more efficient.

The Philippines has posted rapid economic growth in recent years and it is not going to slow anytime soon. It is true that the Philippines has a lot to improve in terms of economic policy, infrastructure and processes to facilitate seamless trade. We struggle every day to do so, even in terms of traffic flow in the streets. Nevertheless, with conviction, I strongly believe that the Philippines is investment worthy, as we have excellent individuals working hard to get things done. And that’s one sure thing an investor can count on.

Eliezer P. Ambatali is an associate 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.
Let’s Talk Tax : Economy
Business World : November 17, 2015

Sabado, Nobyembre 14, 2015

The road to financial transparency: Are we ready to share?

“Building Inclusive Economies, Building a Better World” is the theme of the 2015 Asia-Pacific Economic Conference (APEC) which the Philippines is hosting. In line with this, the member countries have acknowledged the importance of transparency and the need to work together to avert cross-border tax evasion.

Recently, the Philippines took part in the global initiative allowing automatic intergovernment exchange of taxpayers’ detailed financial information.

Commissioner Kim S. Jacinto-Henares of the Bureau of Internal Revenue (BIR) confirmed that the Philippines is one of the 90 countries that would implement the Standard for Automatic Exchange of Financial Account Information in Tax Matters (“Standard”) spearheaded by the Organization for Economic Cooperation and Development (OECD).

The OECD said more than 50 countries “have committed to a specific and ambitious timetable leading to the first automatic information exchanges in 2017.” The Philippines is projected to follow suit some time in 2018.

In August 2015, the OECD released the handbook for the Standard, providing the much needed guidelines for its implementation.

According to the OECD in its background information brief prior to the release of the handbook, under the single global standard, jurisdictions obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. The handbook sets out the financial account information to be exchanged, the financial institutions that need to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions. It consists of two components: a) the Common Reporting Standard (CRS), which contains the reporting and due diligence rules to be imposed on financial institutions; and b) the Model Competent Authority Agreement, which contains the detailed rules on the exchange of information.

What needs to be done by the Philippine authorities?

According to the handbook, the participating country needs to comply with the four (4) core requirements to implement the Standard:

• First is translating the reporting and due diligence rules into domestic law, including rules to ensure their effective implementation.

• Second is selecting a legal basis for the automatic exchange of information.

• Third is putting in place information technology (IT) and administrative infrastructure and resources.

• Last is protecting confidentiality and safeguarding data.

Needless to say, there’s more to laying the groundwork for the CRS. At the periphery are statutory hurdles that put to the test a state’s capabilities and readiness for compliance. For instance, the automatic exchange of information under the Standard runs contrary to the Philippine bank secrecy laws. Under Republic Act Nos. 1405 and 6426, deposits in the Philippines are considered confidential in nature except with written consent of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation.

The challenge is recognized by both Finance Secretary Cesar V. Purisima and BIR Commissioner Henares who share the position that the country needs to amend its regulations if it seeks to align with the Standard. Such calls were reiterated during the presentation of the Philippine delegates in the APEC 2015 Special Senior Finance Officials’ Meeting held in Clark last 21-22 January 2015. During the event, the government affirmed the need to expand the coverage of Section 6 (F) of the National Internal Revenue Code (Tax Code) authorizing the Commissioner to access bank information for prosecution of tax evasion cases to also enable the Philippines to comply with the automatic exchange of information obligation.

The reason for the proposed expansion in coverage springs from the restricted power of the BIR Commissioner to inquire into certain bank deposits even after recent amendments. Instances where such inquiries are authorized include cases involving (1) a decedent to determine his gross estate; (2) a taxpayer who has filed an application for compromise under Sec 204 (A)(2) of the Tax Code due to financial incapacity to pay his tax liability; and (3) exchange of information by request under Republic Act 10021. Hence, the automatic exchange of information set forth by the Standard cannot happen unless the bank secrecy laws are amended and/or the Tax Code expands the power of the BIR Commissioner to inquire into certain bank deposits.

Furthermore, even though the Anti-Money Laundering Act (AMLA) allows inquiry or examination of bank deposits or investments when probable cause of money laundering has been established in court, such information cannot be used by the taxing authority under the CRS since tax evasion is not a predicate crime for money laundering. Hence, the AMLA should be amended to include tax evasion as a crime subject of any of the money-laundering offenses. Finance Secretary Purisima deems the revisions as necessary to ensure continued compliance with Foreign Account Tax Compliance Act (“FATCA”), the Standard and to improve tax collection. Currently, the Philippines is one out of only two countries which does not treat tax evasion as a predicate crime, the other being Lebanon.

Though the Standard appears promising in establishing transparency in cross border transactions and in minimizing tax evasion, the problem lies in setting up the necessary laws and infrastructures for implementation in the Philippines. With barely two years left before its implementation, our readiness to comply with the Standard still rests on shaky ground. Apparently the automatic sharing of information will not be that automatic.

(The views or opinions presented in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The firm will not accept any liability arising from the article.)

Glacy S. Tabirara is an assistant manager at the tax services department of Isla Lipana & Co., the Philippine member firm of the PwC network.

Biyernes, Nobyembre 6, 2015

Timing of withholding tax on compensation

The recent Supreme Court (SC) case on the timing of withholding tax on compensation income has caused quite a stir among corporate taxpayers.

While the case dealt with a deficiency withholding tax assessment on unsubstantiated business expenses (representation, travel and entertainment), the SC also ruled on the subject of withholding tax on accrued bonuses based on the taxpayer’s earlier claim that the amount in question refers to bonuses accrued during the years 1996 and 1997 but paid out in 1997 and 1998.

According to the SC, the duty to withhold the tax on compensation and bonuses arises upon their accrual. While the SC decision has some basis, there are aspects of it that may be called questionable or, at least, impractical if applied sweepingly. Thus, the statement needs to be further reconciled in light of existing withholding tax rules and regulations.

Since most companies will soon be accruing bonuses and other forms of compensation towards the end of the year for pay-out to their employees next year, they face similar issues tackled in the SC case on the timing of withholding and the related issue on the deductibility of the expense.

According to the taxpayer in the case, the duty of an employer to withhold tax on compensation only arises upon actual distribution to the employees. Since the bonuses accrued in 1996 and 1997 were finally determined and distributed only in the following year, i.e., 1997 and 1998 respectively, the taxpayer claimed that its duty to withhold tax on such bonuses should only arise in 1997 and 1998.

On the contrary, the SC held that determination is not a prerequisite for the withholding tax obligation to arise. Under the rules, employers are required to deduct and pay the tax on compensation upon payment to its employees, either actually or constructively.

Further, deductions from gross income should be claimed in the same taxable year when the compensation is “paid or accrued” or “paid or incurred” depending on the method of accounting adopted by the taxpayer.

Based on a 2007 jurisprudence outlining the rules on accrual, the SC reiterated that an expense is accrued when the obligation to pay is fixed, the amount can be determined with reasonable accuracy and is already knowable at yearend. Since the taxpayer in this case applied the accrual method of accounting, it accrued or recorded the bonuses in its books and claimed it as a deductible expense in the year of accrual.

According to the SC, the act of claiming the deduction confirms that the taxpayer recognizes a definite liability, and in that sense, the bonus has already been “allotted and made available” to the employees, giving rise to constructive receipt of the bonus by the employees. On this basis, the obligation to withhold the tax due on the accrued bonuses arose at the time of accrual and not at the time of actual payment.

It is critical to understand and interpret the rules correctly especially given these developments. To my mind, certain issues and practicalities, such as the following, should be addressed:

There were no significant changes to the principle of constructive receipt under Revenue Regulations (RR) 6-82, the applicable withholding tax regulations prior to 1998 and RR 2-98, the existing withholding tax regulations.

Under both RRs, compensation is constructively paid when it is credited to the account of or set apart for an employee so that it may be drawn upon by him at any time although not then actually reduced to possession. In order to constitute payment, the compensation must be credited or set apart for the employee without any substantial limitation or restriction as to the time or manner of payment or condition upon which payment is to be made, and must be made available to him so that it may be drawn upon at any time, and its payment brought within his control and disposition.

The RR 2-98 just expanded the definition of “constructive receipt” with the addition of the following statement:

“A book of entry, if made, should indicate an absolute transfer from one account to another. If the income is not credited, but it is set apart, such income must be unqualifiedly subject to the demand of the taxpayer. Where a corporation contingently credits its employees with a bonus stock which is not available to such employees until some future date, the mere crediting on the books of the corporation does not constitute payment.”

With the foregoing definition(s), the question is, will the principle apply in a case where the employees do not acquire a demandable right over the income, such as when the employees’ claim over the bonuses, at the time of accrual, remains unknown and therefore, restricted? In this case, there should be no payment to speak of, whether actual or constructive. Can it then be argued that there is no obligation to withhold compensation tax at the time of accrual?

Under RR 6-82, the employer is required to withhold tax from the employee’s compensation when paid, either actually or constructively.

On the other hand, RR 2-98 requires that withholding of tax on compensation payments be made upon receipt of income by the employees, which aligns with the cash basis of taxation for employees. However, while the timing of withholding may have been stated differently in RR 2-98, the term “receipt” can still be interpreted as referring to income actually or constructively received.

Thus, where constructive receipt is in question at the time of accrual, such as when the bonus amount per employee is not yet allocated, how will the taxes be computed and withheld considering that the employees fall under different income tax brackets? In relation to this, there may also be some reporting concerns on the year-end alphabetical list (as attachment to BIR Form 1604CF) and the BIR Form 2316, among others.

Assuming that a reasonable allocation of the bonus per employee is available, will such estimated amounts and the related taxes withheld, be required to be reported on the employees’ BIR Form 2316? If so, will the employees then have the right to demand from the employer that same bonus amount that has been allocated to them although still estimated and not yet definite? Will there be any legal repercussions in case the actual bonus payout is lower than what has been earlier allocated? On the other hand, if not reportable on the year of accrual, how and when will the accrued bonus amount and related taxes withheld be reported on the BIR Form 2316?

Also, how will the employees’ eligibility for substituted filing be affected in the event that the actual bonus payout is different from the amount earlier allocated? In this case, the information declared in the alphabetical list and the BIR Form 2316 will not be the same. Will the employees be penalized for not filing a return in the previous year or will the employer be penalized for not correctly withholding the tax on the employees’ total compensation at yearend?

The additional requirement for deductibility of expenses under the 1977 Tax Code (prior to 1998) and the 1997 Tax Code (existing Code) has not changed. Under both Codes, an expense shall only be allowed as a deduction for tax purposes if it is shown that the tax required to be deducted and withheld therefrom has been paid to the BIR in accordance with existing withholding tax regulations.

Interestingly, the SC held that the withholding tax obligation of the employer (even for compensation income) shall arise at the time the income was paid, became payable, or accrued or recorded as an expense in the employer’s books, whichever comes first. In RR 2-98, however, it is quite clear that this three-trigger rule applies to payments other than compensation. Specifically for compensation, the timing of withholding remains to be at the time of the employees’ receipt of the income.

Thus, if the regulations require that the taxes be withheld from the employees upon receipt of the income (whether actually or constructively), then the condition for deductibility of the expense under the Tax Code shall be satisfied so long as it can be shown and proven that the taxes have been withheld and remitted by the employer during the proper period.

For instance, if the concept of constructive receipt is challenged on the year of accrual, then the withholding tax obligation should arise only on the date of actual payout, which is still in accordance with the regulations. Thus, provided that the obligation is carried out on the payout date, the expense should still be allowed.

The above issues are also obviously intertwined and therefore, it is critical to have a clear understanding of how the rules on withholding on accrued bonuses should be applied to avert erroneous interpretation/application. Alternatively, taxpayers may resort to finding relief under the rules of accounting on accrual (e.g., if there is basis not to accrue, but to recognize a mere provision) -- but this is an issue better left in the hands of my fellow auditors.

Raymund M. Gutib is a manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of PricewaterhouseCoopers global network.
Economy : Business World : October 7, 2015

Huwebes, Nobyembre 5, 2015

Senior citizen’s ID: one less thing to remember

Setting aside my personal opinion on issues of public governance, I somehow feel grateful whenever our government exerts effort to show concern and filial care for our senior citizens. One concrete example is the enactment of Republic Act No. 9994, otherwise known as the “Expanded Senior Citizens Act of 2010.”

Unfortunately, while the intention of the law is to promote social justice, there are times when its implementation is afflicted by legal ambiguities. As shared by my mom, there were instances when she was denied the senior citizen’s discount (one of the benefits under the Expanded Senior Citizens Act) just because she had a “senior moment” and forgot to bring her Senior Citizen’s Identification Card (“ID”) issued by the municipality where she resides.

This practice seems to be based on Article 6 of the Implementing Rules and Regulations (“IRR”) of the Expanded Senior Citizens Act which requires senior citizens or their duly authorized representatives to present the Senior Citizens’ Identification Card issued by the Office of Senior Citizens Affairs (“OSCA”). On the basis of this provision alone, the denial of senior citizens’ discounts by some suppliers, due to the failure to present a Senior Citizen’s ID, would seem to be justified.

However, this should not be the case. Article 6 of the IRR should be interpreted in harmony with Article 5.5 of the same implementing rules. Article 5.5 enumerates the identification documents that a senior citizen may use to avail of the benefits and privileges granted under the law. In fact, these documents are reiterated in Revenue Regulations (“RR”) No. 11-2015 recently issued by the Bureau of Internal Revenue (“BIR”).

The said regulations clarified that, in implementing the tax privileges under the Expanded Senior Citizens Act, the senior citizen may use or present any of the following documents:

• Senior Citizens’ ID issued by the OSCA in the city or municipality where the senior citizen resides;

• Philippine passport; or

• Government-issued ID which reflects the name, picture, date of birth and nationality of the senior citizen. This includes Digitized Social Security ID, Government Service Insurance System ID, Professional Regulation Commission ID, Integrated Bar of the Philippines ID, Unified Multi-Purpose ID, and Driver’s License.

Thus, based on the IRR and as clarified by the BIR, the Senior Citizens’ ID should only be one among many other documents that may be used by senior citizens in availing of the benefits and privileges granted by the law, particularly the 20% senior citizens’ discount and exemption from value-added tax (“VAT”).

To limit the entitlement of our senior citizens to the benefits granted to them, just because they failed to present the Senior Citizens’ Identification Card issued by OSCA, would be in clear contravention of the objectives and purpose of the Expanded Senior Citizens Act. Among its policy intents are to establish mechanisms whereby the contributions of the senior citizens are maximized, and to adopt measures whereby our senior citizens are assisted and appreciated by the community as a whole.

Thus, suppliers of goods and services (e.g., drug stores, hospital pharmacies, etc.) should interpret the law consistent with the legislative spirit of extending the privilege to its targeted beneficiary -- the senior citizens. After all, they can always claim the discount and the input VAT as additional items of deduction from their gross income provided they comply with the conditions set forth under the rules. This includes keeping a separate record of the sales which contains the information of the senior’s citizen’s identification document as provided by RR 11-2015.

I have read on the Internet that “To care for those who once cared for us is one of the highest honors.” (Tia Walker, The Inspired Caregiver). Hopefully, the issuance of RR No. 11-2015 (effective 15 Oct. 2015) will help clear up any confusion and give additional assurance to our senior citizens that they will be able to enjoy their benefits and privileges as accorded by law.

Maria Ysidra May Y. Kintanar-Lopez is an Assistant Manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of PwC network.
Economy : Business World : October 21, 2015

Martes, Oktubre 27, 2015

Article I of the Tax Reform Bill: Give back to the people

“I don’t mind being taxed at a higher rate but I would like it to be given back to the people through public service and infrastructure and not corrupted by government officials.” I smiled upon hearing this from a fresh graduate when asked for her thoughts during a job interview about the proposed tax reform bill.

Indeed, everyone is aware of the tax reform bill pending in Congress. The bill was drafted to finally amend the almost two-decade-old income tax brackets set forth in the 1997 National Internal Revenue Code of the Philippines. The income tax rates are stuck at the 1997 levels. That means that an employee earning P500,000 per year and his company president who earns P20 million per year are subject to the same tax rate of 32%. How could we sleep on this? Do we have fair and equitable tax laws?

With a bill proposing to lower the individual income tax rate currently pegged at 32% to 17% and corporate income tax rate from 30% to 25%, we could probably rest well once it is finally approved. It has been several months ago when this news on said tax reform bill was announced on television and released on social media. Never has it been missed as one of the topics discussed with our clients during meetings or even petty conversations in the elevators. Everyone was excited until last month when it failed to get the nod of the President. Emotions poured and hopes of the people were shattered by the open rejection of Malacañang.

As one of the taxpayers, it is difficult to understand why Malacañang is against the tax reform. After all, having a higher net pay would enable me to spend more, right? Not to mention the many related taxes I am required to pay. I could easily rebut that the loss in the government’s collections on my income tax will be compensated with the additional value-added tax (VAT) that I have to pay when I shop, and there is also an income tax impact on the part of the seller for its earnings on the same item sold. It is time for the government to give back to the people and to give them the quality of life they deserve. After all, the taxpayers’ purchasing power will inevitably even generate higher taxable revenues as a whole.

In addition to what taxpayers like us would like to inform Malacañang -- stop worrying about the losses you will incur from lower our income taxes. Instead, start to be consistent and steadfast in guarding our taxes from being stolen by corrupt officials.

Drifting away from these sentiments, and looking into the reasons behind the draft tax bill, little can we understand the hesitation of the Malacañang. It is noted that the tax bill has been drafted in preparation for the Association of Southeast Asian Nations’ (ASEAN) economic integration this 2015. The reduced personal and corporate income tax rates will make the Philippine workforce and Corporations, doing business in the Philippines, competitive with their ASEAN neighbors.

Simply put, lower income tax rates will attract foreign investors to set up and bring in their business to the country. Thus, means more jobs for the Filipinos -- our kababayans will no longer work abroad and leave their families behind.

In the midst of the ASEAN integration and while the President remains firm in its refusal to cut tax rates, investors who are in the Philippines may be realizing that doing business in our country may be costly considering the tax perspective alone. Our fear is that these investors may withdraw and transfer their businesses in countries where taxes are lower than ours. We may later find ourselves along with other hundred applicants buying out for only one open position in a company.

With the initial statement of the President opposing the proposed tax bill last month have generated negative responses on television and social media. His reluctanc e to appr ove the bill prompted a number of Filipinos to sign the petition launched by the Tax Management Association of the Philippines urging Malacañang to reconsider its position on proposed income tax bill.

The sentiment of the Filipino tax payer is for our government to hear the plea of the lower and middle income tax payers. Not every working Filipino watches the noontime show AlDub, but the noontime show has resulted to over 39 million tweets. We hope that we can do the same with the petition to Malacañang, because it is every working Filipino who is affected with the tax reform bill.

Although there are reports that the President is reconsidering the idea of tax reform, let’s hope that he sees the full wisdom of the proposal. Let’s hope that Congress will not be influenced by some detractors. While we do understand that Congress has dedicated its remaining regular sessions for the 2016 national budget, we hope and pray that they will not end 2015 without urging the President to immediately pass the bill. So long as our workers are one of the pillars of our economy, one cannot disagree to the appeal of easing their tax burdens.

Marie Fe F. Dangiwan
Let’s Talk Tax
P&A Grant Thornton

Linggo, Oktubre 25, 2015

The dilemma of Philippine tax reform

The call for tax reform is ever growing in the Philippines, out of fear we are being left behind by our neighbors in Southeast Asia, coupled with concerns that our people are at the mercy of the current tax system.

Our legislators have put forward revenue bills to finally amend the almost two decade-old income tax brackets set forth in the 1997 National Internal Revenue Code of the Philippines. Unfortunately a few days ago, the House of Representatives shelved the bill proposing the reforms.

The House Committee on Ways and Means said that it was influenced by the President’s unwillingness to endorse the bill. In view of the incoming recess of Congress, the House finally decided that the remaining days of their regular session will be dedicated to finishing deliberations for the 2016 national budget. This undeniably will delay, or worse, mark the end of income tax reform under the present administration.

Under the 1987 Constitution, all revenue bills must originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments. Although it seems that the Senate of the Philippines is supportive of tax reform, it cannot however make a more definitive move unless the House gets its own version of the bill approved. Having seen that the House no longer deems the time sufficient to discuss the income tax reform, the Senate and the public turned out to be waiting in vain.

What then is the role of the President in all these? Why has his disapproval seem controlling in deciding the fate of the revenue bill? It must be noted that all bills passed by Congress, before it becomes a law, shall be presented to the President. If he disapproves the bill on lowered income tax, he will simply veto it and return the same with his objections to the House. Thus, another round of deliberations ensues. Not to mention that Senate shall likewise pass upon the reconsideration of the President’s objections. Imagine just how much time and efforts will be wasted if the President will just veto the bill. Who knows, the bill might not even survive the reconsideration of Congress after the President vetoes. 

The Administration fears that lowering income tax will negatively affect the budget. I believe that the issue lies not in the amount of tax collection. Rather, it is the efficient management of funds collected. Full realization every peso’s value is a must, and blocking tax reform must not be the government’s safety net.

In addition, the taxes foregone are estimated at P30 billion, relative to a P3-trillion budget. Such an amount will not really have a noticeable impact, should the government manage the impact of the tax reform properly.

Tax professionals are appealing to the chief executive to change his mind and support the lowering of Philippine income tax. Recently, the Tax Management Association of the Philippines launched a petition urging the president to reconsider his position on income tax reform. I certainly hope that more people come forward and support this cause. Remember, unity is strength and strength comes in numbers. Let our voices be heard and don’t let tax reform die at the hands of the present administration.

Could this be the end of tax reform under the current President or will our voices be loud enough to make him reconsider?

Lorraine G. Taguiam
Let’s Talk Tax
P&A Grant Thornton

Miyerkules, Setyembre 30, 2015

Mandatory use of non-thermal paper for tape receipts (Revenue Regulations 10- 2015)

Use of non-thermal paper for all CRM/POS and other invoice/receipt-generating machine/software shall be mandatory effective on October 7, 2015 (15th day after its publication) for new business registrants.

Considering the costs of transitioning to non-thermal paper, for existing registered taxpayers, staggered implementation shall be in effect over three years as follows:

Machines Registration date:                Implementations dates:
July 1, 2014 onwards                           On or before July 1, 2018
July 1, 2013 – June 30, 2014               On or before July 1, 2017
Prior July 1, 2012 – June 30, 2013       On or before September 1, 2016

Existing taxpayers, though, may opt to transition to non-thermal paper earlier. The use of non-thermal paper is necessary to ensure the preservation of documents over the required 10-year period.

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