Last week, we voted for the leaders we wanted to run the country. Soon, the next administration will be sworn into office, and taxpayers are looking for definitive guidance on taxation to be issued by our next set of leaders and legislators.
Taxation has evolved with the ebb and flow of governments. The National Internal Revenue Code or the Tax Reform Act of 1997 superseded the 1977 Tax Code. Electronic filings were also introduced, including the Electronic Filing and Payment System (eFPS), the eBIRForms System, and electronic certificates authorizing registration (eCAR), among others. We are currently in the middle of streamlining the BIR’s registration processes and other taxpayer transactions. Significant tax reform laws have been passed, including the Tax Reform for Acceleration and Inclusion (TRAIN) Law and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
With new leadership coming on board very soon, what are on the wishlists of the taxpayers? Here is what we think taxpayers will be most looking forward to:
PACKAGES 3 AND 4 OF THE COMPREHENsIVE TAX REFORM PROGRAM (CTRP)Packages 3 and 4 of the CTRP are currently being deliberated in the senate. Package 3 focuses on the standardization of the real property valuation and assessment system to establish benchmarks and to regulate tax rates and assessment levels. On the other hand, Package 4 focuses on the simplification of the taxes on passive income, with a view towards increasing capital mobility and financial inclusion.
Packages 3 and 4 may still be passed until June 30, but if these may still be handed off to the next administration.
BROADER TAX AMNESTY PROGRAMSo far, we have had the estate tax amnesty law, which provided a simpler process for settling estate tax due that remain unpaid or which have accrued as of Dec. 31, 2017. In this regard, the filing of the Estate Tax Amnesty Return and payment estate tax due must be made not later than June 14, 2023.
There was also an amnesty on delinquent accounts, covering taxes due arising from BIR audits in which the tax assessment has become final and executory. This amnesty was made available until June 30, 2021.
How about a wider tax amnesty program to include other tax types, allowing taxpayers a clean slate? Some relief on past tax obligations would be welcome, freeing up taxpayers to focus their efforts on growing their businesses. A general tax amnesty could again be on the cards, balancing the interests of taxpayers and the government.
INTEREST ON DELAYED TAX REFUNDSAs we know, when taxes are owed to the government, and if there is a delay in making such payments, the government charges 12% interest. However, when a taxpayer is entitled to a tax refund, delayed refunds do not expose the government to interest payments.
In the worst-case scenario, an application for tax refunds may end up not acted upon, leaving taxpayers no recourse other than to elevate the application to the courts. Even if the taxpayer wins, the time it takes to reach a court ruling could be substantial, tying the taxpayer’s funds up for years.
Other jurisdictions allow interest on delayed tax refunds. The next administration could look into this to improve perceptions of the tax system’s basic fairness.
STREAMLINED TAX PROCESSES, EFFICIENT AUDITSThe Bureau of Internal Revenue (BIR) continues to streamline its processes for the sake of simplicity and efficiency. The BIR could explore other areas to streamline, either by further reducing filing requirements or the time given to the BIR to act on pending transactions.
Taxpayers are also hoping for BIR audits to be completed faster. There is a common impression that some tax audits are based on pure conjecture, with the bureau acting on mere comparisons of accounts that are sometimes unrelated. These instances sometimes generate preposterously large tax assessments in the initial findings. Perhaps tax audit methods could be revisited to make the process more efficient.
Taxpayers could be wanting more with the entry of the next administration. But whatever the new government ends up doing, continued reform and improvements to the tax system are definitely among the expectations.
Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.
Mark Ebenezer A. Bernardo is an associate of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.