In the early weeks of September, a number of companies registered with the Bureau of Internal Revenue (BIR) as Large Taxpayers, received a Subpoena Duces Tecum (SDT) served by the BIR Large Taxpayers Services Division. The SDT required taxpayers to appear before the Chief of the BIR’s Prosecution Division to present and submit documents related to their Computerized Accounting Systems (CAS), such as: (1) proof of registration of CAS pursuant to Revenue Regulations No. 9-2009; (2) related Annexes submitted with the CAS application; (3) sample print-outs of receipts/ invoices; and (4) sample printouts of books of account, among others.
According to the BIR, this is its way of determining taxpayer compliance with Revenue Regulations No. 9-2009 which requires Large Taxpayers to maintain a registered CAS. Moreover, this is also said to be BIR’s way of pushing taxpayers to upgrade and register their systems in preparation for the BIR’s digitalization projects, one of which is the electronic transmission of sales data to the BIR through the Electronic Invoicing/Receipting System (EIS).
Indeed, the SDTs served their purpose as non-compliant taxpayers were forced to upgrade their systems and have them registered with the BIR in order to avoid facing the consequences. From what I’ve observed, the issuance of SDTs to taxpayers is still ongoing.
This enforcement strategy has now raised questions on whether the BIR has gone too far. Is the issuance of an SDT an appropriate recourse for the BIR to enforce compliance with tax rules?
Almost six months before the issuance of the SDTs, the BIR issued Revenue Memorandum Circular (RMC) No. 33-2023 to clarify the issuance and enforcement of SDTs. According to the RMC, the application of the current guidelines and procedures governing SDTs, such as Revenue Memorandum Order (RMO) No. 10-2013 as amended by RMO No. 8-2014, is focused on taxpayers under audit or investigation who failed to comply with the written notice for information or relevant records. Thus, RMC No. 33-2023 is issued to clarify that the issuance and enforcement of SDTs also applies to the monitoring and verification of taxpayer compliance with relevant tax laws, in general.
Under the RMC, the current guidelines in issuing and enforcing SDTs also apply to any examination of a book, paper, record, or other data which may be relevant in evaluating the compliance of taxpayers who are liable for tax or required to file a tax return.
Moreover, the compliance of registered taxpayers may be evaluated through the examination of the following documents:
• Payment of annual registration fee;
• Issuance of sales invoices or official receipts;
• Keeping of books of account;
• Timely filing of requisite tax returns and the payment of taxes due thereon;
• Withholding of tax on income payments subject to withholding and timely remittance of such tax withheld;
• Filing of required information returns, such as the summary list of sales/ purchases (SLSP), annual alphalist of payees, etc. on or before the due dates prescribed by law or existing revenue issuances, whenever applicable; and
• Other data which may be relevant
For unregistered taxpayers, the BIR is to notify them and require them to register and pay voluntarily any unpaid taxes. In case of failure to register or to pay taxes, the BIR office concerned is to endorse the case to the Regional Investigation Division or National Investigation Division for the conduct of a preliminary investigation in preparation for the filing of a Run After Tax Evaders (RATE) case and/or other tax enforcement actions.
RMC No. 33-3023 appears to justify the action of the BIR to issue SDTs in order to call out taxpayers and enforce compliance with tax rules, such as the required registration of CAS. Thus, I suspect that the BIR will continue to issue SDTs to compel compliance with other tax rules.
Complying with an SDT is more challenging for taxpayers since the timeline for the submission of required documents is tighter than that of a regular BIR tax audit. Under Section 3.8 of RMO No. 10-2013, the date for the submission of books of account and other accounting records is set on the 14th day from the date of issuance of the SDT. However, based on experience, the appointment date set in the SDT is shorter than this 14-day prescribed period.
Moreover, non-submission or incomplete presentation of the required books of account and other accounting records may result in criminal prosecution of the individual who disobeyed the SDT. Payment of the administrative penalty will not excuse the taxpayer/person summoned from complying with the SDT.
As the government continues to extend efforts to monitor the compliance of taxpayers with tax law, may this article raise awareness among taxpayers, who need to be prepared and compliant, not only in relation to the status of their CAS registration, but also with regard to all their tax practices.
In any case, while we all agree that tax compliance should be enforced as taxes are the lifeblood of the government, I hope the BIR will also consider providing sufficient time for remediation or compliance, especially for taxpayers who are willing to comply but only lack guidance.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.
Nestine P. Buisan is a manager at the Tax Services department of Isla Lipana & Co., the Philippine member firm of the PwC network.
