#AskTheTaxWhiz: What’s BIR’s basis for charging penalties, compromises?

I have been in the business for more than 10 years. I comply with the Bureau of Internal Revenue (BIR) requirements but I always end up paying penalties and compromises. Is BIR authorized to charge us penalties and compromises? What is their basis?

Yes. The BIR is mandated to assess and collect all taxes, including penalties and compromises.  Assessment is based on the documents submitted to the BIR, primarily the information provided in the monthly and annual tax returns, including but not limited to audited financial statements and other schedules.

Generally, any discrepancy in the financial and tax information being examined will result in an assessment. And this is subject to penalties and compromises according to Section 255 of our Tax Code. In fact, these penalties are also printed in all BIR forms, to wit:

1. A surcharge of 25% for failure to file and/or pay any internal revenue tax at the time or times required by law or regulation;
2. A surcharge of 50% in case a false or fraudulent return is willfully made;
3. Interest at the rate of 20% per annum on any unpaid amount of tax from the date prescribed for the payment until it is fully paid;
4. Compromise penalty of up to P50,000 ($1,143.43*).

Are all taxpayers being audited every year?

No. Roughly 10% of the total taxpayers are being audited every year. The BIR determines its priority list of taxpayers for audit purposes unless you give the examiners reason to audit you every year.

I heard about Citizen Tax Planning (CTP) Certification Program from my colleagues. Can CTP help me end my problems with the BIR?

Yes. CTP implements a game-changing tax strategy to analyze, correct, and improve your tax compliance. Being fully compliant must not just be your opinion. It must be ascertained by experts and correct advice must be strictly followed. 

To know more about the CTP Certification Program, join us at the next INTEGRITY FORUM on Wednesday, August 20, at the J.V. Del Rosario Room, 4/F AIM Conference Center, Makati City. Registration starts at 1:30 pm. This is organized by the Integrity Initiative, Makati Business Club, and the European Chamber of Commerce of the Philippines.

For inquiries, call (02) 845 1324 loc. 246.

Got a question about taxes? #AskTheTaxWhiz! Tweet @rapplerdotcom or email us at business@rappler.com. – Rappler.com

Mon Abrea is a former BIR examiner and an advocate of genuine tax reform. He serves as chief strategy officer of the country’s first social enterprise, the Abrea Consulting Group, which offers strategic finance and tax advisory services to businesses and professionals. Mon’s tax handbook, “Got a Question About Taxes? Ask the Tax Whiz!” is now available in all bookstores nationwide. Follow Mon on Twitter: @askthetaxwhiz or visit his group’s Facebook page. You may also email him at consult@acg.ph.

*($1 = P43.73)

Stamp image from shutterstock