#AskTheTaxWhiz: How much ‘SOP’ should a taxpayer pay? (Part 2)

Mr. Tax Whiz responds to the queries of “Ignorant Taxpayer” published June 3.

Dear IT,

Thank you for attending the Tax Avoidance Congress in Baguio. Your commitment to do what is right is a good start to contribute in pushing for a genuine tax reform.

I am sorry to hear about your bookkeeper. I know many bookkeepers will react but it is true, and it is happening around the country.

We need to do our share. First, talk to your congressman about your problems in doing business, particularly in paying taxes. Support all tax reform bills which aim to update and introduce a simple and fair tax system. Second, bribing Bureau of Internal Revenue (BIR) examiners is wrong. Not paying the right taxes is even worse. We need to stop bribing and start paying the right taxes. Third, try to be honest at all times and hire good accountants who can help you to pay the right taxes.

You might feel you are saving a lot by just compromising but in the long run, it will be more costly and exposed to BIR audit.

Now, since your bookkeeper refused to turn over your files, you may authorize one of your staff to proceed to your Revenue District Office (RDO) and request for a list of open cases. This is the list of tax returns not filed with the BIR.

You may file “affidavit of loss” for all missing documents.

Regarding the tax questions during the congress, I will gladly share my answers so more taxpayers will be informed and resolved to support our advocacy for genuine tax reform:

Case 1

Again, it is wrong to bribe an examiner (SOP, or so-called standard operating procedures or kickbacks) or to compromise your tax deficiency. This has to stop. It is highly arbitrary and discretionary on the part of the BIR examiner and the RDO officer on how much to ask or to accept.

The fact is, once you bribe an examiner, they expect you to double the compromise every year.

Case 2

You should stop negotiating right away with BIR examiners. Upon receipt of the “letter of authority,” rather than rushing to the BIR office to meet the examiner, you should have asked your accountant to prepare the documents and to reply in writing to BIR acknowledging the letter and attaching initial documents for their reference.

You only negotiate if there is already an assessment after the audit. But your intention should not be to compromise but rather, to protest the assessments so you will pay the right deficiency tax.

You may complain about the BIR examiner but it will not change the fact that you failed to comply with the BIR audit.

Case 3

No. It depends on the assigned examiner. Delaying the audit only makes you look guilty of hiding something or not paying the right taxes.

Yes. Only 10% or even less of total taxpayers are being audited every year. I think you know the answer why you are audited every year: you gave them a reason.

There is no guarantee that the BIR audit will stop as it is the mandate of the BIR to assess and to collect taxes from all taxpayers. But if you decide to do it right, to pay the right taxes, you don’t have to worry about getting auditing  or not.

If you have started bribing examiners for whatever reason, I suggest you consider the Citizen Tax Planning (CTP) Certification Program.

The CTP Certification Program functions as an International Organization for Standardization (ISO) certification both for individuals and companies. It has 7 steps to be implemented for two to 3 years to help taxpayers improve their tax compliance and declare true profit to pay the right taxes, without the burden of unnecessary penalties and compromises.

By promoting the CTP Certification Program to individuals and companies, we can help the government collect the right taxes. The certification program aims to bridge the gap between the country’s growing businesses, both in sophistication and in numbers, and the tax administration in hitting its increasing revenue goal.

The program offers solutions to the endless problem of corruption in tax collection by implementing a game-changing tax strategy that will help taxpayers declare true profit and pay the right taxes. Rather than rely on the regular audit which is highly discretionary on the part of the BIR examiner, the program aims to promote honesty by encouraging individuals and businesses to increase voluntary compliance instead of paying penalties and compromises.

To know more about the CTP Certification Program, call our tax specialist at +63 917 801 0191.

Also, in partnership with the Philippine Center for Enterpreneurship (GoNegosyo), we have a Magandang Business Advice (MBA) Program on tax for entrepreneurs on Monday, June 15.  This is a 4-hour training on tax awareness for entrepreneurs and professionals who would like to gain insights on how to enjoy a “tax-free” lifestyle – a lifestyle not free from taxes, but from unnecessary penalties and compromises. Register here.

We can only help you if you help yourself.

Mr Tax Whiz

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 consulting 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 bookstores nationwide. Follow Mon on Twitter: @askthetaxwhiz or visit his group’s Facebook page. You may also email him at consult@acg.ph.

Tax concept image via Shutterstock