Last week, like millions of devout Catholic Filipinos, I was able to complete a nine-day series of Masses also known as “Simbang Gabi” albeit via live streaming due to the COVID-19 pandemic. Historically, it was said that the beloved Christmas tradition started when priests said dawn masses instead of traditional evening mass to accommodate churchgoers who had to go to work. It is thought that those who complete all dawn Masses will be granted a wish. I can still remember when I fervently wished to pass the qualifying examination for the accountancy program of my alma mater. Lo and behold, my wish was granted and I am now happily living my dream.
Fortunately, for taxpayers, the government has been supportive due to the lingering adverse impact of the COVID-19 pandemic to the business community. Not wanting to add any burdens to the catastrophic events of 2020, the government took the initiative in helping taxpayers with ongoing tax assessments through the deadline extension to avail of two of the Bureau of Internal Revenue’s (BIR) voluntary compliance programs: the tax amnesty on delinquencies; and the voluntary assessment and payment program.
TAX AMNESTY ON DELINQUENCIES (TAD)
Section 4 (tt) of Republic Act No. 11494, otherwise known as “Bayanihan to Recover As One Act,” allows the moving of statutory deadlines for the filing and submission of documents, including the payment of taxes to ease the burden on individuals under community quarantine.
To implement the provision, Revenue Regulations (RR) No. 32-2020 provides that TAD can be availed of until June 30, 2021 by those taxpayers with delinquent internal revenue liabilities for taxable year 2017 and prior years.
However, it should be noted that the extension refers only to the last day to file the application and to avail of the TAD, but the coverage remains the same — delinquent internal revenue liabilities or under any of the covered instances under Section 3 of RR No. 4-2019, on or before April 24, 2019. Thus, taxpayers with delinquent accounts after the prescribed period may not qualify to avail of the benefits of TAD and may run the risk of being subject to the BIR’s summary administrative collection remedies if filed belatedly.
VOLUNTARY ASSESSMENT AND PAYMENT PROGRAM (VAPP)
Pursuant to RR No. 21-2020, the purpose of VAPP is to limit taxpayer contact considering existing COVID-19 related protocols and social distancing measures while, at the same time, maximizing revenue collection at the least administrative cost by encouraging an increase in voluntary tax compliance.
RR No. 33-2020 provides that qualified persons can avail of the benefits of VAPP until June 30, 2021, unless extended further by the Secretary of Finance.
Also, the following additional clarifications were provided:
1. Taxpayers availing of VAPP on withholding taxes are allowed to claim deductions on the corresponding income payments.
2. The following instances invalidate the availment of VAPP:
a. When there is strong evidence or finding of under-declaration of sales, receipts or income or overstatement of deductions by more than 30% based on a written report of the appropriate revenue official stating the facts with supporting documents, such as Notice of Discrepancy (ND) and other third-party information (TPI) documents; and
b. When there is verifiable information that the taxpayer has withheld tax but failed to remit the same.
3. No denial of application or invalidation of a previously issued Certificate of Availment will be valid unless the taxpayer is formally notified, stating the factual facts thereof. Accordingly, the denial or invalidation can be appealed to the Assistant Commissioner — Large Taxpayer Service or Regional Director within 30 days from receipt of such notice.
However, as much as the foregoing clarifications are a welcome development to taxpayers, I would like to respectfully submit the need to check the reasonableness of the ground to invalidate the availment of VAPP due to “strong evidence or findings based on ND or TPI” as provided in the RR which may be premature.
On one hand, in the case of an ND, what if an audited taxpayer has already submitted a position paper contesting the allegations and providing the supporting documents against the alleged under declaration of income or over declaration of expenses? Note that under RR No. 21-2020, qualified taxpayers may avail of the benefits of VAPP except those who have already been issued a Final Assessment Notice that are final and executory. Thus, at the ND stage, will the submission of a position paper within the period allowed by pertinent tax laws overturn the burden of proof; and, therefore, the basis of invalidation due to strong evidence has no leg to stand on?
On the other hand, in the case of TPI documents, I respectfully submit that the BIR officer must provide certifications from the counterparties (e.g., supplier or customer) of the audited taxpayer to ensure the merit of the alleged strong evidence or findings. Otherwise, the availment of VAPP should not be invalidated by mere presumptions without credible evidence. The Supreme Court has ruled that the absence of confirmation or certification from third-party sources renders the computerized/third-party matching wrong and without merit.
Further, BIR may revisit certain issues to make the VAPP more attractive to taxpayers. While the BIR has issued Revenue Memorandum Circular No. 111-2020 to clarify certain questions relating to VAPP availment, the tax office may consider a second look to provide more attractive and lenient conditions such as removal of the condition to pay withholding tax (amount not withheld and not remitted in 2018) first before availing of VAPP; or in case there is no increase or decrease in the total taxes due for all tax types in 2018 as compared to all taxes due in 2017 (as in the case of enterprises enjoying tax exemptions and incentives), the voluntary tax payment is to be computed based on the net increase of more than 30% (instead of a deemed net increase of not more than 10%) which will ultimately yield a lower amount of voluntary taxes to be paid; or allowing a taxpayer to avail of the benefits of the program without requiring to cover both Sections 9a and 9b of RR No. 21-2020. Accordingly, such options will enable taxpayers to better evaluate the pros and cons of availing of VAPP and may contribute to an increased availment turnout. After all, is it not the ultimate objective of the extension?
Nevertheless, while robust tax collection should be the utmost priority to help defray the increased expenditures of the government during this pandemic, the BIR programs will surely help taxpayers who suffered major losses due to the pandemic. A second chance that will alleviate the suffering of our countrymen as we prepare to face a new tomorrow full of hope.
God is in control. With that in mind and heart, let us all celebrate and enjoy every moment we have with our families without any fear for tomorrow. Let us all count our blessings and carry on in life with a grateful heart.
As we find the cure very soon, I can look back with a smile knowing that this generation has an excellent opportunity to make a difference: a second chance to see the world full of life and, for me, one more chance to serve my purpose with a new life.
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.
Daryl Matthew A. Sales is a manager of the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.