BIR launches voluntary assessment program as it cuts audits amid pandemic

The Bureau of Internal Revenue (BIR) is offering a voluntary assessment and payment program, as it seeks to reduce tax audit investigations amid the pandemic. — PHILIPPINE STAR/KRIZ JOHN ROSALES

By Beatrice M. Laforga, Reporter

THE Bureau of Internal Revenue (BIR) is offering a program to allow taxpayers to voluntarily settle their tax arrears, as the agency seeks to reduce its audit investigations amid the coronavirus disease 2019 (COVID-19) pandemic.

BIR Commissioner Caesar R. Dulay issued Revenue Regulation No. 18-2020 on the Voluntary Assessment and Payment Program (VAPP), which aims to collect additional tax revenues that would have been otherwise generated through audits.

“To limit taxpayer contact considering existing COVID-19 related protocols and social distancing measures while, at the same time, maximizing revenue collection with the least administrative costs, the BIR is reducing the number of audit investigations by encouraging an increase in voluntary tax compliance,” the agency said.

The BIR emphasized the decline in revenue collections this year, saying the VAPP will allow taxpayers to “help defray the increased expenditures of the government during this pandemic through voluntary payment of additional tax under the VAPP for the covered period, with or without an audit/investigation.”

The revenue regulation, which was signed on Aug. 18, will take effect 15 days after it was published in a newspaper on Sept. 5.

The BIR said the program covers all internal revenue taxes for the taxable year ending Dec. 31, 2018 and fiscal year 2018 ending July 2018 to June 2019.

Also covered are taxes on one-time transactions such as estate tax, donor’s tax, capital gains tax (CGT), as well as one-time transaction-related creditable withholding tax (CWT) and documentary stamp tax (DST).

Excluded from the VAPP are taxpayers who have received a final assessment notice prior to the launch of the program; those under investigation filed by a tax informer; and those involved in cases of tax fraud, tax evasion and other criminal offenses pending before the Justice department or in the courts.

Taxpayers have until Dec. 31, 2020 to avail of the program, or unless Finance Secretary Carlos G. Dominguez III extends the cut off period.

Applicants need to submit an application form and payment form with proof of payment to the BIR. The bureau may also require filed tax returns; proof of tax payments in 2017 and 2018; audited financial statements; copy of remittance returns; proof that final and creditable withholding taxes were paid; copy of paid and stamped BIR Form 0605; and a filled-out one-time transaction tax return.

“Failure to act and/or pay the required amount on the part of the taxpayer within such period shall result in the denial of the application,” it said.

The BIR previously offered the VAPP in 2005 and 2001.

Maria Lourdes P. Lim, the tax managing partner of Isla Lipana & Co. PwC Philippines, said the VAPP is a form of administrative tax amnesty and will help the bureau boost its collections while relieving taxpayers of the burden of being audited and paying penalties on deficiency taxes.

“While understandable for the Department of Finance/BIR to think of measures that will increase revenue collection, it seems that there were no prior consultations made with the stakeholders as this suddenly came out,” she said in a text message Sunday.

Taxes collected by the BIR were down 10.53% to P1.115 trillion in the first seven months of 2020, as economic activity has been affected by the lockdown that started in mid-March.

Ms. Lim said the amount of taxes to be paid is still subject to certain conditions depending on percentage of sales or net taxable income set by the bureau on a case-to-case basis, but subject to a minimum amount depending on subscribed capital for corporations.

She added the program is also only available for a “very limited time” covering just one taxable year, and the approval of application is not automatic since the bureau will still have to evaluate it within 30 days.

“There is no provision on deemed approval if the BIR does not complete its evaluation within the 30-day period — still no closure and peace of mind to the availing taxpayer. Considering these and cash constraints, taxpayers would need to pensively assess the attractiveness of the program,” she said.

Currently, there are two ongoing tax amnesty programs: the tax amnesty program for delinquent accounts valid until the yearend; and the estate tax amnesty program which can be availed of until May 31, 2021.