Business groups support Tax Incentives Act

MANILA, Philippines – The Philippine Business Groups and Joint Foreign Chambers (PBG-JFCs), a coalition of 14 local and foreign business groups, wrote the House and Senate Committees on Ways and Means to express support for the draft or amended version of the proposed Tax Incentives Management and Transparency Act, also known as TIMTA.

Officially called House Bill 2492 and Senate Bill 2669, the measure is a joint effort between the Department of Finance (DOF) and the Board of Investments (BOI).

The business groups whose memberships total nearly 35,000 firms and individuals lauded the objective of the bill to promote transparency and accountability in granting incentives, and submitted recommendations to the congressional committees in a statement released on May 31.

The recommendations included the following:

PBG-JFC Recommendations

•  Amend the Declaration of Policy to reflect the State policy to attract, promote and welcome productive investments from foreign nationals in activities which significantly contribute to national industrialization and socio-economic development.

• Remove the requirement of electronic filing of income tax returns (ITR) as this filing method may change from time to time depending on applicable or existing regulations of the Bureau of Internal Revenue (BIR)

Lower penalties for failure to submit application for incentive claims with the BOI and other Investment Promotion Agencies (IPAs) within 6 months from forfeiture of incentives to imposition of a fine ranging from P1,000 ($22.44) to P50,000 ($1122.4), depending on the amount of incentives availed, to make the penalty consistent with the National Internal Revenue Code (NIRC).

• Remove the proposed provision effectively extending by 18 months the prescriptive period within which the BIR may make an assessment.

Aside from diminishing the substantive rights of taxpayers afforded under the 1997 NIRC, the additional 18-month period is unconstitutional as it violates the equal protection clause.

There is no substantial distinction between IPA-registered enterprises and regular corporations in so far as BIR tax audit and examination are concerned.

Both IPA-registered enterprises and regular corporations are bound by law to file their annual ITRs on the same date, April 15, so the 3-year prescriptive period for the BIR to make an assessment from the filing of the income tax return is already a reasonable period.

Both are bound by the same deadline for the filing of their respective audited financial statements.

 The 1997 NIRC imposes upon the BIR a time period within which to make an assessment and enforce collection. Beyond this period, the BIR loses its right to issue an assessment or enforce collection.

The prescriptive period to assess is 3 years from filing of the ITR, while the prescriptive period for collection is 5 years from the issuance of the assessment.

The Supreme Court has honored these prescriptive periods to protect citizens from possible government abuse of taxation.

The proposed House version significantly extends the prescriptive period from 3 years to 4 and a half years, which is an unnecessary diminution of substantive rights already granted to taxpayers.

• Clarify the extent and scope of the publication to be truly reflective and balanced.

The information to be published should also include such matters as the employment generated, the amounts invested, the products/services made available to the economy/public, and even all the other taxes actually paid by the concerned taxpayers/entities.

While the intent is to monitor the availment of tax incentives for information purposes, the publication of such information would give the negative impression that the taxpayers involved are not sharing the same burden as ordinary taxpayers.

The PBG-JFC also proposed the inclusion of taxes directly paid by the IPA- registered enterprises or taxes remitted by them on behalf of other taxpayers (e.g., withholding tax on compensation, fringe benefits tax, etc.) in the data analysis.

• Clarify the role of the BIR in connection with BOI/IPA as regards incentives.

In many instances, the BIR disallows incentives even if these are already approved by the BOI or IPAs.

The BOI and relevant IPAs have exclusive jurisdiction to determine eligibility for investment incentives. In at least two decided cases, the Supreme Court held that the BIR cannot question the incentives given by the BOI/IPAs as this is beyond the BIR’s authority.

Despite these court decisions, the BIR continues to encroach on the BOI/IPAs jurisdiction to determine eligibility for incentives.

The signatory organizations include the following:

• American Chamber of Commerce of the Philippines
• Australian-New Zealand Chamber of Commerce of the Philippines
• Canadian Chamber of Commerce of the Philippines
• European Chamber of Commerce of the Philippines
• IT and Business Process Association of the Philippines
• Japanese Chamber of Commerce and Industry of the Philippines
• Korean Chamber of Commerce of the Philippines
• Management Association of the Philippines
• Philippine Association of Multinational Companies Regional Headquarters
• Philippine Chamber of Commerce and Industry of the Philippines
• Philippine Exporters Confederation, Semiconductor and Electronics Industries in the Philippines Foundation
• Tax Management Association of the Philippines. ­– Rappler.com

 $1 = P 44.55