The Need to Make Paying Taxes Easy
By Euney Marie Mata-Perez on November 11, 2021
Nothing is certain except death and taxes, Benjamin Franklin wrote in 1789. It is a statement remains true today.
Tax compliance is certain, too, with its attendant costs, uncertainty at times, and pains. So for the government to collect more taxes, it should make paying taxes easy — not just for giant multinationals that can afford to hire hundreds of finance personnel but also for the simple jeepney driver who wants to do what’s right.
I was approached by a jeepney driver at one Lingkod TMAP activity, which isa Tax Management Association of the Philippines (TMAP) initiative that assists and advises taxpayers during tax filing season. He wanted to pay his taxes but did not know how to go about it. He had no records and no knowledge whatsoever on how to prepare a tax return and pay. I was, of course, amazed by his sincerity. He was certainly a hero in his own right. I truly believe there are many more enlightened citizens like him out there.
There is undoubtedly a need for the government to make the burden of paying taxes easier, especially for medium, small-sized, and individual taxpayers.
Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (Train) law moved towards a tax system that supports ease of paying taxes. Among others, it introduced provisions that increased the value-added tax (VAT) threshold to P3 million, imposed an 8-percent income tax on individuals whose gross sales or gross receipts do not exceed the P3 million threshold and which tax shall be in lieu of the VAT, and required that income tax returns consist of a maximum of four pages only.
House Bill 8942 (HB 8942), the proposed “Ease of Paying Taxes Act,” intends to introduce further changes to make paying taxes easy: Classification of taxpayers. Distinguishing or classifying taxpayers is key. Requirements for small taxpayers should be different and simpler than those for large ones. HB 8942 introduces provisions that expressly authorize the Finance Secretary, upon recommendation of the Internal Revenue Commissioner, to establish reasonable criteria for classifying taxpayers, taking into consideration various factors.
These include taxpayer capacity to comply with tax rules and regulations, amount and type of tax paid, gross sales and/or receipts of the taxpayer, as well as inflation, business volume, wage and employment levels, and other similar factors. It also proposes provisions that authorize the Finance Secretary to classify large and medium-sized taxpayers and introduce additional classifications as deemed necessary and reasonable to achieve better service and tax administration.
Simplified returns and processes. HB 8942 also calls for the implementation of simplified tax rules and regulations for ease of compliance.
VAT invoicing. HB 8942 seeks to eliminate the distinction of documentation and basis of sales as against services subject to VAT. At present, sales subject to VAT should be evidenced by invoices while services subject to VAT should be covered by official receipts. HB 8942 makes the basis and documentation uniform to just VAT invoices.
Adjustment of VAT exemption threshold. HB 8942 also proposes to add a provision regarding the P3 million VAT threshold — increased by Train — that allows the adjustment to its present value not later than January 31, 2021 and every three years thereafter based on the consumer price index published by the Philippine Statistics Authority.
Payment of taxes before they are due. HB 8942 seeks to amend provisions in the National Internal Revenue Code to expressly allow the payment of taxes before these are due. This impliedly allows payment of tax not necessarily simultaneously with the filing of a return. For the first time, HB 8942 also introduces definitions of the terms “filing of return” and “payment of tax”. (Yes, these have not yet been defined in the Tax Code).
Flexibility of venue of payment of taxes. HB 8942 allows flexibility with regard to the place where taxpayers can pay taxes. It proposes to delete provisions in the Tax Code that require that taxes be paid at BIR offices or banks within the jurisdiction of the taxpayer’s legal residence, principal place of business or principal office.
While there may still be many areas where payment of taxes can be made easy, HB 8942 is nonetheless a welcome development. We look forward to its passage soon.
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Euney Marie J. Mata-Perez is a CPA-lawyer and the managing partner of Mata-Perez, Tamayo & Francisco (MTF Counsel). She is a corporate, M&A and tax lawyer and is the president of the Asia-Oceana Tax Consultants’ Association. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you can email the author at firstname.lastname@example.org or visit the MTF website at www.mtfcounsel.com