On tax compliance and digitalization

With the change of government, we should certainly expect changes; for taxpayers, new tax policies, programs, and rules are also anticipated. Some taxpayers are excited, others skeptical, a few may be worried. But whatever emotions we have right now, we will not go wrong if we know how to comply with the rules and fulfil our obligations.

“Give to Caesar what is Caesar’s, and to God what is God’s.” This was what Jesus told the Pharisees after being asked whether it is lawful to pay taxes to Caesar or not. Scholars have written that this episode from the Bible commands people to respect authority and to pay the correct taxes the government demands of them.

As the government will not be able to function without the taxes paid to it, it is incumbent upon taxpayers to pay the correct taxes. The funds are needed for infrastructure, education, and relief from crises, among others.

We might have heard the argument, “Why would we pay the correct taxes if others are not doing so?” Or perhaps, “If we pay taxes, the money will just be wasted or be put into the pockets of unscrupulous individuals.” While there may be truth to these statements, being affected by such negative thoughts does not help in any way, as we ourselves have our own obligations. Paying the correct taxes is a duty that is legal, moral, and perhaps, even spiritual.

It has also been said that the Philippines has numerous and more complex tax laws than those of other countries. Sometimes, we even hear foreigners weigh in on how our tax laws are too stringent, difficult, and complicated. Unfortunately, there is no substitute but to really gain ample knowledge about Philippine tax laws.

Clearly, our compliance with tax rules must be sustained, particularly now. We are living in a tech savvy era. This was further heightened by the impact of the COVID-19 pandemic that restricted movement, and which has consequently led the people to resort to technology to connect with one another and to do most of their work.

The BIR is likewise continuing to go digital to cope with the changing times. At the beginning of this year, the BIR’s Priority Programs and Projects included a Digital Economy Policy, which seeks to gear tax rules and regulations to better capture the digital economy. Included also in the priorities were the reconfiguration of the filing system/facility, and the enhancement of taxpayer services through a Taxpayer Registration Database Management System, among others.

Just last week, the BIR issued Revenue Regulations (RR) No. 08-2022, prescribing policies and guidelines on the use of the electronic invoicing/receipting system (EIS). This regulation required the following to use EIS: (a) taxpayers engaged in the export of goods and services; (b) taxpayers engaged in electronic commerce (e-commerce); (c) and taxpayers under the Large Taxpayers Service.

RR No. 08-2022 directs certain taxpayers to comply with: (a) issuance of e-Receipts/e-Invoices to their customers/buyers, in lieu of manual receipts/invoices; (b) registration of their Computerized Accounting System (CAS) generating e-receipts/e-invoices and/or Cash Register Machines (CRM)/Point-of-Sales Systems and Certification of Sales Data Transmission System; and (c) transmission of the sales data covered by the e-receipts/e-invoices using their Sales Data Transmission System into the EIS of the BIR.

Moving forward, some are anticipating that additional guidelines related to CAS may also be forthcoming. Others believe, that perhaps, the e-mail platform will be the more frequent mode of communication and submission of applications with the BIR (e.g., filing of applications for BIR ruling, filing of replies/protest letters in tax assessments, or filing of tax refund applications). Moreover, the guidelines and extent of the use of electronic signatures might also be further expanded. These anticipated changes are mere surmises, and we will have to watch out for the issuances by the current BIR administration.

While we are in the present digital era and given the ever-evolving landscape of Philippine taxation, taxpayers must be able to adapt to change. We have to keep abreast of the tax developments, read and understand the issuances of the BIR and the decisions rendered by the courts on tax cases that are released from time to time, and attend tax training seminars for updates; particularly now that more changes are anticipated as tax administration is passed on to a new set of leaders.

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.

Olivier D. Aznar is the head and partner of the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com.