Why the BIR e-filing system is not feasible – for now
Taxpayers or tax practitioners continue to burn their eyebrows to ashes to beat the deadline for the filing of Income Tax Returns (ITR) on Wednesday, April 15.
Adding to this misery is that the BIR has just issued a new revenue regulation (Number 5-2015) dated March 17, 2015, or barely a month before the deadline for filing ITRs. The BIR, in its new regulation, amended Section 3, paragraph 2 of Revenue Regulation Number 6-2014. It is now mandating an almost all-encompassing requirement of electronically submitting and filing all tax returns, and imposing penalties for non-compliance.
Among the penalties to be meted out for non-compliant taxpayers or filers is a fine of P1,000 ($22.39) per return for manually filed returns PLUS a civil penalty equivalent to 25% of the tax due to be paid.
Under this new regulation, a taxpayer, upon successful validation of the accomplished tax return, shall receive a system-generated notification email which acknowledges that the tax return has been successfully filed. The taxpayer will then have to print the Filing Reference (FRN) page that is generated by the system. The same shall be submitted to the Authorized Agent Banks (AAB) for the payment of the taxes due thereon.
Based on experience, without this FRN, a taxpayer will not be entertained by the BIR or the bank. There is, thus, a lot of room for errors here. For example, one has faithfully followed the required e-filing system but, for one reason or another, did not receive the BIR’s system-generated notification email.
The taxpayers thus ask: “Is this legal? Is this valid? Is this just?”
Make e-filing convenient
Taxes are what we pay for a civilized society, the Supreme Court said. Taxpayers are mandated to pay taxes to ensure that the operation of the government will be smooth-sailing and will not be paralyzed.
However, taxation is not a one-way process. While taxpayers are imposed with burdens by contributing a portion of their earnings to the government, the latter shall, in return, make the payment process, including the filing system, not troublesome to the point that paying of taxes and filing of returns become torturing and distressing.
In the first place, following one of the principles of a sound tax system, which is “administrative feasibility,” the BIR shall issue regulations that are capable of being effectively enforced with the least inconvenience to the taxpayers.
The intention of the BIR may be good, but the means sought by the bureau (the immediate implementation of e-filing of returns despite insufficient transition of time and notice) to accomplish its purpose will greatly prejudice the taxpayers, especially those who are not well acquainted with the present mode of filing.
For the time being, the strict observance of e-filing is not administratively feasible for the following reasons:
BIR has its own fair share of unpreparedness in venturing completely to new, centralized e-filing system.
The BIR’s website, if not always down, is slow moving, despite its recent upgrade of bandwidth from 15 mbps to 60 mbps. Thus, it becomes difficult for taxpayers to immediately file their returns even if they are ready for filing before deadline. This problem has not yet been well-resolved by the BIR.
Considering the big number of taxpayers filing their returns, the BIR must ensure that its system is efficiently functioning and can accommodate all taxpayers even at the last second of April 15.
Considering this dilemma, it is shallow and illogical for the BIR to say that penalties will be imposed on taxpayers who are unable to file their returns on the last day of e-filing even if the BIR website shall crash on that date.
The statement from the BIR indicates the agency anticipates that its e-system will crash. There is no assurance that it can fully accommodate all the taxpayers. To add insult to the injury, BIR Commissioner Kim Henares remarked that, “If our system is down, we will know and we will normally give an advisory that they can submit manually and then they can submit online within a certain period.”
BIR may be overlooking the fact that filing of the returns even on the last second of April 15 still makes the taxpayer compliant.
The commissioner went further by remarking, “but, of course, if they all submit at the deadline and our system slows down and they are unable to file, then they will be penalized.”
She further rationalized this by saying, “If they fail to make the deadline because they choose to file on the last day, knowing a lot of people will be filing on the last day, then this is not force majeure anymore.”
Henares may have overlooked that filing of the returns even on the last tick of the clock on April 15 makes the taxpayer compliant. If taxpayers could not file their returns on that day for reasons attributable to the shutting down of e-filing system of the BIR, then they should not be penalized for that. As earlier mentioned, the BIR has the obligation to ensure the efficiency of its filing system. Otherwise, the imposition of the penalty will be confiscatory, unreasonable, and oppressive in violation of due process of law.
BIR may have forgotten that not all taxpayers and tax practitioners are technologically equipped in e-file returns.
The bureau must take into consideration that there are those who are equipped with computers and complete facility, while others, particularly those who have been in the earlier practice of tax, are not.
With the implementation of the present regulation, the BIR wrongfully assumed that big and small taxpayers and tax practitioners or auditing firms, as the case may be, have equal capabilities and facilities to meet the demand of the BIR.
The truth is, there is a real and enormous difference, which, if disregarded, as it is now disregarded, violates their right to due process of law and equal protection of the law enshrined in the Constitution. By implementing the e-filing to all taxpayers and practitioners, without regard to existing substantial distinctions among them, the guaranty of equal protection clause is violated.
The BIR must be reminded: there must be equality among equals – an element of fundamental fairness.
Overall, it seems apparent that the Filipino taxpayers, as well as the BIR, are not yet ready to face this completely centralized e-filing system today and, at least, until April 15. While BIR’s efforts to move to a more technologically advanced filing system is commendable, its implementation should not be made so abruptly.
While other countries have adopted a more advanced technology in tax filing and payment system, they still maintained a manual filing and payment system as a simple and convenient option for the other taxpayers who may have predicaments in adopting the new method. Unfortunately, the BIR seems to be doing exactly the opposite.
As funny as it may seem, a good reality check would reveal that most actively working accountants or auditors are used to do things manually or with the help of but a simple typewriter. Has the BIR given enough time to ponder on what these types of taxpayers or filers will do with this new regulation?
Aside, probably, from having no choice but to give in and simply pay the mandated penalties, these taxpayers will be once again left at the mercy of the BIR, which is yet another opportunity for corruption.
Bottom line, the taxpayers still lose, only the BIR wins.
Again, the BIR must be reminded: the end does not always justify the means. – Rappler.com
Edgar V. Mendoza is a certified public accountant, certified management accountant, and lawyer. He is managing partner at Mendoza Navarro-Mendoza & Partners Law Offices.
(Editor’s note: BIR extended the deadline for electronically filed “No Payment” ITRs to June 15, but the April 15 deadline for the manual filing for "No Payment" ITRs will still be in effect. READ: BIR extends deadline for e-filing of tax returns to June 15)
$US1 = P44.66