Let’s Talk Tax
By Maricel P. Katigbak
Someone once said, “Today is hard, tomorrow will be worse, but the day after tomorrow will be sunshine.”
Never give up. Ever since COVID-19 broke out, no day has been easy. The lockdown and quarantine caused job losses and disrupted what we consider normal.
The pandemic has dominated headlines for the past 10 months. Unfortunately, there are other challenges apart from this crisis. As I write this, super typhoon Goni (Philippine name: Rolly) is hammering southeastern Luzon with strong winds, high waves and floods. This is another blow to the already troubled economy.
With all these challenges, businesses are certainly adversely affected, and taxpayers are definitely asking about tax relief and measures to help them on the road to recovery. Currently, taxpayers can get some form of relief from the following: (1) Republic Act No. 11494 or the Bayanihan to Recover as One Act (Bayanihan II), (2) Voluntary Assessment and Payment Program (VAPP), and (3) Tax Amnesty Program on delinquencies.
There has been a lot of discussion on relief measures, including the extension of the net operating loss carryover over the next five years, tax exemptions for certain donations, tax exemptions for retirement benefits, COVID-19 special risk allowances, compensation and hazard pay, among others.
In relation to Bayanihan II tax relief, the Bureau of Internal Revenue has issued revenue regulations (RR) 24-2020, 25-2020, 26-2020, 27-2020, 28-2020, and 29-2020. These BIR issuances provide the conditions and requirements needed in order for the taxpayers to avail of the exemptions from taxes, thereby aiding their recovery if only in part.
Under this program, the impression is this was launched to maximize and promote the government’s revenue collections. Taxpayers are encouraged to make voluntary payment of additional tax due covering the taxable year ended Dec. 31, 2018 and fiscal year 2018 ending on the last day of the months of July 2018 to June 2019, including certain covered one-time transactions. The BIR issued Revenue Memorandum Circular 111-2020 to clarify certain issues relating to the VAPP application.
However, viewed in another way, taxpayers may want to have another look at the program to see whether the program actually benefits them. The main benefit of the program is the privilege of taxpayers availing of VAPP to be exempted from audit for the covered taxable period and for the tax types covered by the availment. Consequently, the program would save taxpayers the bother of a full-blown tax assessment, which has the potential to reach the courts.
Comparing the benefits of the program with the costs of availing, some companies may find some form of relief to their advantage. At least, if the tax assessment process is taken out, even for just one taxable year, a company focuses more on its business operations and recovery strategies.
It should also be noted that the deadline for availing of the VAPP is on Dec. 31, 2020 unless extended by the Secretary of Finance.
TAX AMNESTY PROGRAM ON DELINQUENCIES
This amnesty program was issued by the BIR last year, and its availment was extended until Dec. 31, 2020. It provides for the processing of the tax amnesty application on delinquent accounts as defined in Republic Act 11213, covering the taxable years ended 2017 and earlier.
As in the case of VAAP, the taxpayer may consider weighing the costs and benefits of availing of the tax amnesty program. The idea is for the taxpayers to get some things out of the way, in order to have more time to spend on the core business.
These programs remind taxpayers that there is always some form of relief available during these challenging times.
As COVID-19 cases continue to rise, aggravated by a recent calamity, it is good to know that the government is responding and that each of us is showing resilience. It is never easy, but we get stronger despite the crisis.
The taxpayer wish list, perhaps, includes asking the government to broaden the tax relief to ease their burden and to help them effect a speedy recovery. Congress is currently considering a general tax amnesty law to support the government’s finances. Hopefully, this proposal and other tax measures happen very soon, as we need swift action in these difficult times. The government and each of us need to work together to recover. Resilience is an important part of growth and change. This is our new reality and we can fight.
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.
Maricel P. Katigbak is a senior manager of the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.