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Subject: TAX-FILES : What Constitutes Tax Evasion? Author: mmJun- Music Inside Buzz research/report [ Next Thread | Previous Thread | Next Message | Previous Message ] Date Posted: 01:44:03 06/26/05 Sun Author Host/IP: 222.126.7.90 In reply to: music inside buzz report by mmJun 's message, "Song Bird Update on Tax Issue ( aka Tax Sham / Media fraud )" on 23:53:56 06/14/05 Tue S u b j e c t - TAX-FILES : What constitutes tax evasion? Antonette C. Tionko and Eugene M. Pulga, SGV & Co. Inquirer News Service / Jun. 24, 2005 WITH the many tax evasion cases being filed by the Bureau of Internal Revenue against corporations and individuals under the Run After Tax Evaders (RATE) program, many still wonder, "What constitutes tax evasion?" In general, tax evasion is a scheme used outside lawful means and when availed of, usually subjects the taxpayer to further or additional civil or criminal liabilities. (Jose C. Vitug and Ernesto D. Acosta, Tax Law and Jurisprudence 44). Thus, any person who willfully neglects to file a return within the period prescribed by the National Internal Revenue Code (NIRC) or willfully files a false or fraudulent return will be liable to a penalty of 50 percent of the tax or of the deficiency tax. A substantial under declaration, of sales, receipts or income or a substantial overstatement of deductions as determined by the BIR commissioner constitutes prima facie evidence of false or fraudulent return. Failure to report sales, receipts or income by at least 30 percent of that declared in the return constitutes substantial under declaration, and a claim of deductions in an amount exceeding 30 percent of actual deductions will be considered an overstatement of deductions. (Section 248(B), 1997 Tax Code) The NIRC imposes additional penalties for certain crimes and offenses, such as: a. Willful attempt to evade or defeat tax-a fine of not less than P30,000 but not more than P100,000 and suffer imprisonment of not less than two years but not more than four years; (Section 254, NIRC) b. Willful failure to file return, supply correct and accurate information, pay tax, withhold and remit tax and refund excess taxes withheld on compensation-a fine of not less than P10,000 and imprisonment of not less than one year but not more than 10 years; (Section 255, NIRC) All the above acts or omissions constitute tax evasion which connotes the integration of three factors: (1) the end to be achieved, i.e., the payment of less than that known by the taxpayer to be legally due, or the non-payment of tax when it is shown that a tax is due; (2) an accompanying state of mind which is described as being "evil," in "bad faith, " "willful," or "deliberate and not accidental"; and (3) a course of action or failure of action which is unlawful. (De Leon, Fundamentals of Taxation, 1998 edition, cited in CIR v. The Estate of Benigno Toda Jr. G.R. No. 147188 dated Sept. 14, 2004). Recently, the Supreme Court ruled that a certain scheme was tainted with fraud and therefore constituted tax evasion. In the said case, Company A sold a piece of property for P100 million to an individual, who was a close business associate of Company A's primary shareholder. The individual purchaser, in turn, sold the same property on the same day to Company B for P200 million. Company A paid, among others, its tax on gain from the sale of the property at the rate of 35 percent as corporate income tax for 1989. On the other hand, the individual paid the 5 percent capital gains tax (CGT) on the same year. The Supreme Court ruled in this case that the scheme resorted to by Company A and its primary shareholder cannot be considered legitimate tax planning. Such scheme is tainted with fraud. Fraud, in its general sense, is deemed to comprise anything calculated to deceive, including all acts, omissions and concealment involving a breach of legal, or equitable duty, trust or confidence justly reposed, resulting in the damage to another, or by which an undue and unconscionable advantage is taken of another. The intermediary transaction which prompted more on mitigation of tax liabilities than for legitimate business purposes constitutes one of tax evasion. Moreover, the three factors constituting tax evasion exist in this case. (CIR v. The Estate of Benigno Toda Jr., id). To summarize, to determine whether in fact someone can be held liable for tax evasion, the three factors enumerated must be present. Absence of just one will mean the case will not prosper. +++++++++++++++++++++++++++++++++++++ This was published on page B8 of the June 24, 2005 issue of the Philippine Daily Inquirer. http://money.inq7.net/features/view_features.php? yyyy=2005&mon=06&dd=24&file=2 +++++++++++++++++++++++++++++++++++++ This was posted in the Regine Velasquez fans yahoo groups. And other groups like S.O.P. and OPM. Posted by mmJun with the Music Inside Buzz web site. M. I. B. http://insidebuzz.tripod.com " So Regine fans and local music fans will be informed. " =============================================== Isn’t the showbiz media an industry? You will agree with me that it is not an asylum for the insane. As such, the showbiz media industry must also be regulated by the State for it can cause far greater damage by attacking the minds of our people. -MN =============================================== [ Next Thread | Previous Thread | Next Message | Previous Message ]

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[> [> Subject: Re: TAX-FILES : Tax Teporting Responsibilities Author: mmJun- Music Inside Buzz research/report [Edit] Date Posted: 01:49:37 06/26/05 Sun Author Host/IP: 222.126.7.90 TAXFILES : Employees and employer's tax reporting responsibilities Ruben R. Rubio and Jose Rey R. Manuel, SGV & Co. Inquirer News Service / Jan. 21, 2005 First of two parts) FOR EMPLOYEES and their bosses, here's a checklist of New Year's tax responsibilities they should not overlook. • Employees' status • Responsibilities • Update of records Employees are required to inform their employer before the end of the calendar year if there are changes in their status during the year, i.e., if an employee got married, was declared legally separated, or became a widow or widower; had an additional dependent or if a dependent died; had a qualified dependent child, brother or sister with no mental or physical defect who turned 22 years old on or before Dec. 31; had a qualified dependent child, brother or sister who got married or became gainfully employed. These changes directly affect the tax liability of employees because their status is considered by the employer in the determination of tax, hence, the importance of updating their records with the Bureau of Internal Revenue (BIR) through their employer.To reflect the change of status, employees should submit to the employer within 10 days from such change the Certificate of Update of Exemption and Employer and Employee's Information (BIR Form No. 2305) and the required attachments, specifically, documents proving the change in status. For married employees, they should indicate in the form who, between the husband and wife, will claim the additional exemption. If the wife claims the additional exemption, a signed waiver or sworn statement of the husband should be submitted. It is worth noting that, in the case of legally separated spouses, the additional exemption may be claimed only by the spouse who has custody of the child, provided that both are allowed to claim additional exemption for dependents not exceeding four. As for employees with multiple employments during the taxable calendar year, all previous employers should be disclosed in the form. For first time registrant-employees, the Application for Registration (BIR Form No. 1902) and the required attachments/evidence of change are needed and should be submitted to the employer within 10 days from the start of employment. Taxpayer's Identification Number (TIN) It is important that at yearend, employees supply their correct TIN to their employer. The TIN will be needed by the employer in the preparation of the list of employees from whom taxes were withheld and the Certificate of Income Payments and Taxes Withheld (Bureau of Internal Revenue (BIR) Form No. 2316). Absence of a TIN means inefficient monitoring of transactions by the BIR since the agency is making use of vital information obtained via the TIN system to, among others, trace an employee's taxable transactions, monitor if correct taxes have been paid on taxable transactions, update its database of taxpayers and detect non-filers or stop-filers. In addition, the government essentially requires, in all registrations and transactions, the transacting public's mandatory use of TIN in government forms or documents, permits, licenses and official papers for which they shall enjoy priority or preferential action in their transactions with government offices. It includes employees who are required to make, render or file a return, statement or other documents with the BIR. For new registrants, submission of the Application for Registration (BIR Form No. 1902) to the agency by the employer entitles employees to obtain their TIN. Multiple employments Employees who transferred to another employer (successive employment) during the calendar year should furnish their new employer with the Certificate of Update of Exemption and Employer and Employee's Information (BIR Form No. 2305), indicating their previous employment and provide a copy of their Certificate of Income Payments and Taxes Withheld (BIR Form No. 2316) for the taxable year issued by the previous employers. All income from all employers during the taxable year should be considered in the calculation of tax liability. Community Tax Certificate (CTC) Employees who are required by law to file an income tax return are required to pay in the Municipality/City where the residence of an employee is located a community tax not later than the last day of February of each year. The community tax accrues on the first day of January of each year. A community tax certificate will be issued to every employee upon payment of the community tax. If the community tax is not paid within the prescribed deadline, an interest of 24 percent per annum will be imposed from the due date until the tax is actually paid. The community tax certificate is also required to be shown by employees in some instances like when receiving license, certificate, or permit from any public authority; paying a fee; transacting official business. For this purpose, the community tax certificate must be the one issued for the current year. However, for January until April 15 of each year, the certificate issued for the preceding year may be used. Workers who are abroad for the entire year and who are not required to file a return, may still secure a community tax certificate if they will enter into any of the above transactions or they own a real property with an aggregate assessed value of P1,000 or more. Annual Income Tax Return (ITR) It is the obligation of all employees to file their Annual Income Tax Return (BIR Form No. 1700), except if they are treated as non-filers (i.e. gross compensation is equal or less than the total exemptions; an employee whose pure compensation income derived from one employer does not exceed P60,000 and taxes have been correctly withheld) or qualified under the principles of substituted filing of returns. (See related article: "No more filing?" By Ruben R. Rubio and Alicia A. Catalla, SGV and Co.(Jan. 30, 2004)) Employees who are required to file their income tax return must submit the return, together with the Certificate of Taxes Withheld (attach all BIR Form No. 2316 in case of multiple employment), on or before the 15th day of April of each year covering income for the preceding taxable year. No-payment ITRs must be filed with the appropriate Revenue District Office (RDO), whereas with-payment ITRs must be filed with any Authorized Agent Bank (AAB) within the RDO, or if there is no AAB within the RDO, with the Revenue Collecting Officer or duly authorized city or municipal Treasurer. -------------------------- part two -- > (Second of two parts) IT IS the duty of an employer to submit the application for registration (BIR Form No. 1902) or the exemption certificate (BIR Form No. 2305) to the Revenue District Office (RDO) where the business is located within 30 days from receipt from the employees. The employer must indicate on the forms the date it received the papers. Being the withholding agent, the employer must also accomplish or update the required form. The employer should provide the employee concerned with a copy of the forms filed with and received by the BIR. The employer should apply the correct exemptions and status in the computation of taxes required to be withheld on the compensation income of the employee. Where the husband has waived the additional exemption, the employer of the husband must furnish the employer of the wife a copy of the signed waiver form or sworn statement of the husband. Withholding taxes An employer must deduct a withholding tax from the salaries he pays to his employees. The procedures in determining the tax are explained further in Revenue Regulation 2-1998, Section 2.79. The employer makes a return (BIR Form No. 1601C-monthly remittance return) and remits the tax on or before the 10th day of the month following the month in which the withholding was made to the AAB (accredited bank) within the RDO where the registered address of the employer is located -- if there is no AAB, to the revenue collecting officer or duly authorized city or municipal treasurer. The tax withheld for the month of December however, will be remitted on or before the 15th day of the month following the month in which the withholding was made. For employers who are enrolled in the electronic payment and filing system (EFPS), the filing (staggered filing) and payment deadline set under the said program should be strictly followed. The employer may withhold the tax on the basis of the average estimated compensation, with the necessary adjustments, for any month/quarter/year. Annualization: Deficiency or excess tax Before the calendar year ends but prior to the payment of compensation for the last payroll period (December or when the employee was terminated) the employer will determine the amount of withholding tax on compensation income or refund due to all employees by computing the tax due on the taxable income for the entire taxable calendar year or period of employment for that year, including the last compensation to be paid, 13th-month pay and other incentives and compensation from previous employment less the sum of taxes withheld from January to November of the same taxable calendar year or period of employment for that year, including those withheld from previous employment. Any deficiency tax will be deducted from the last compensation. Any excess tax will be refunded not later than Jan. 15 of the following year. However, if employment was terminated before December, the refund will be given at the payment of the last compensation. 13th-month pay With a few exceptions, employers are required to pay a 13th-month pay not later than Dec. 24 of every year to all their rank-and-file employees, regardless of the amount of basic salary they receive in a month, and regardless of their designation or employment status and irrespective of the method by which their wages are paid, provided that they have worked for at least one month during the calendar year. The 13th-month pay is equivalent to 1/12 of the total regular basic salary earned during the year or at a certain period. An income exclusion not exceeding P30,000 is granted to benefits received by employees such as productivity incentives, Christmas bonus, mid-year bonus, cash bonuses, including the 13th month pay. Employers required to withhold the tax should file the annual information return (BIR Form No. 1604CF), together with the alphabetical list of employees who are recipient of income payments, to the RDO or large taxpayers assistance division / large taxpayers district office on or before Jan. 31 of the succeeding year. If the employer has 10 or more employees, it is required to submit the said list in a 3.5-inch diskette using a BIR-prescribed format. If the number of income payees is nine or below, the employer has the option to submit a diskette. In any case, the manually prepared list should be attached to the information return when filing. Separate schedules may be prepared for foreign nationals. Only readable diskette upon submission will be considered as duly filed alphalist by the employer. Employers are required to store the same for three years as backup. The filing of the BIR Form No. 1604 CF, together with the alphalist, will be considered a substituted filing of the employees' income tax return to the extent that the amount of compensation and taxes withheld appearing on the said form is consistent with the corresponding amount indicated in BIR Form No. 2316. Withholding certificate The employer is required to furnish its employees from whose compensation income taxes have been withheld the certificate of income payment/tax withheld (BIR Form No. 2316), on or before Jan. 31st of the succeeding calendar year, or if employment was terminated before the close of such calendar year, on the day of which the last payment of compensation was made. When certified by both the employee and employer, it is tantamount to the filing of Form 1700. The employer is required to retain a copy of the duly signed Form 2316 for three years. This was posted in the Regine Velasquez fans yahoo groups. And other groups like S.O.P. and OPM. Posted by mmJun with the Music Inside Buzz web site. M. I. B. http://insidebuzz.tripod.com " So Regine fans and local music fans will be better informed. " ============================================= Isn’t the showbiz media an industry? You will agree with me that it is not an asylum for the insane. As such, the showbiz media industry must also be regulated by the State for it can cause far greater damage by attacking the minds of our people. -MN ============================================= [ Post a Reply to This Message ]

[> [> [> Subject: Re: TAX-FILES : Subpoena / Tax Audits Author: mmJun- Music Inside Buzz research/report [Edit] Date Posted: 01:52:55 06/26/05 Sun Author Host/IP: 222.126.7.90 S u b j e c t - TAX-FILES : Subpoena duces tecum: an avoidable process in tax audits Wilfredo U. Villanueva and Noel G. Liok, SGV & Co. Inquirer News Service / Apr. 01, 2005 ON THE premise that taxes are the lifeblood that runs the vast machinery of the government, how does the Bureau of Internal Revenue (BIR) deal with uncooperative or errant taxpayers when conducting tax audits? With the drive to enhance the government's revenue performance, tougher measures are certainly the BIR's rejoinder. The BIR can, in fact, rely on a compulsory process more generally associated with proceedings in courts to facilitate the examination carried out by its revenue officers. It is empowered to issue and enforce subpoenas duces tecum in order to compel a taxpayer to present his tax records for tax audit purposes. The taxpayer will benefit in paying attention to this compulsory process since noncompliance carries criminal penalties. Moreover, the guidelines prescribed by the BIR in this process can be useful since the same guidelines also imply the limits of the process. By understanding the process and by knowing these limitations, the taxpayer can, at best, prevent or, at the acceptable minimum, manage this process that can often prove disruptive and stressful and can present unwarranted risks. What is a subpoena duces tecum? A subpoena duces tecum is an order that requires a person to bring with him books, documents or other things under his control. In the context of assessments, a subpoena duces tecum commands a taxpayer or its officer, under the threat of penalty, to appear before an office of the BIR at a specified time and to bring a described set of tax records, for example, contracts, general ledgers, sales journals and other accounting documents. The power to issue subpoena duces tecum is anchored in Section 5(C) National Internal Revenue Code of 1997 (1997 Tax Code). This provision gives the BIR commissioner, in ascertaining and collecting tax liability or in evaluating tax compliance, the authority to summon a person liable for tax or required to file a return, or any officer or employee of such person, or any person having custody of the books of accounts and other accounting records to appear before the commissioner or his authorized representative at a specified time and place and to produce such records. Preparation before issuance Noting that investigations of tax liabilities are sometimes unnecessarily delayed due to "uncooperative" taxpayers, the BIR issued certain procedures preparatory to the issuance of a subpoena and its enforcement by legal action. Specifically, Revenue Audit Memorandum Order 3-82 fleshes out the audit procedures for documenting the non-cooperation of a taxpayer in the presentation of his books and other records for inspection. The procedures require that: 1. The revenue examiner first request the taxpayer, in writing, to make available for inspection, the relevant books of accounts, accounting records and particular documents, indicating the time and date when the records should be made available. 2. If on the appointed time, the documents are not presented, the examiner should seek an explanation and again make a written request. 3. If, for the second time, the taxpayer fails to present the required records, the examiner must request an explanation in writing, signed by the taxpayer, why the records are still unavailable. 4. During all the stages above, the examiner should prepare a memorandum of interview, signed and dated, which should contain the date, time, place and persons present as well as a statement of what transpired. It bears stressing that the memorandum of interview may be used in the event of trial. Thereafter, the examiner, in consultation with his supervisors, should then submit a written report, pinpointing the records not made available, the taxpayer's officers who are liable, and the cause of the unreasonable and/or unnecessary delay in his investigation. Finally, the division chief or the revenue district officer will forward the case to the chief of the prosecution division or the legal branch for the issuance of the subpoena or the filing of the case in court if needed. Issuance of the subpoena Revenue Memorandum Order (RMO) No. 35-90, as amended by RMO No. 09-03, lays down additional guidelines and states that the recommendation for the issuance of the subpoena is further evaluated by the prosecution division or legal branch. More importantly, it confines the authority to issue the subpoena to the following revenue officials only: In appropriate cases, the commissioner and the deputy commissioners. 1. At the national office: The assistant commissioner of legal service 2. At the regional offices: Director, or in his absence, the assistant director, or the chief of legal division, only as an alternate and as may be authorized by the regional director. Once issued, the subpoena should be served by the revenue examiners assigned to investigate the case or any revenue officer deputized for this purpose. A subpoena is served by handing in person an original copy to the individual named. If he refuses to receive it, it is tendered to him as witnessed by another revenue officer. If personal service is not possible, a copy may be left either at the taxpayer's: 1. Residence with person of suitable age and discretion residing there; or 2. Office or regular place of business with some competent person in charge. Remedies to enforce compliance of the subpoena Where the taxpayer or the person named fails, refuses or even neglects to comply with the commands of the subpoena, he may be proceeded against by: 1. Filing a criminal case for violation of Sections 5(C), 14, 266 of the 1997 Tax Code. Upon conviction, he may be punished with a fine of not less than P5,000 but not more than P10,000 and imprisonment of not less than one year but not more than two years; and/or 2. Initiating proceedings for indirect contempt at the Regional Trial Court under Sections 3(f) and 12 of Rule 71 of the Rules of Court. General observations Because the guidelines require the examiner to exhaust two requests for the submission of documents, the taxpayer should have enough breathing room to comply without the compulsion and adversarial nature of a subpoena. Unlike the process of a subpoena -- normally a last resort to secure information -- in these instances, the taxpayer and the examiner can often agree on a workable leniency in the assessment's timetable and documentation process. Thus, it would be prudent for the taxpayer to capitalize on these instances to seek helpful clarifications, for example, on the extent or kind of documentation required or its relevance to the assessment. In short, prior to a subpoena, there is more flexibility. In addition, the RMO requires the BIR to document the process through a memorandum of interview. Hence, as a precaution, the taxpayer should have his own form of documentation in the event that there is dispute in the process and the BIR's memorandum is used in trial. The taxpayer's own documentation may serve as a reference to supplement or even countercheck the BIR's memorandum. As stated in the beginning, knowing the guidelines can also help the taxpayer determine whether the subpoena was issued by the authorized BIR officials or if certain procedures have been omitted in the issuance. Conclusion For both the government and the taxpayer, there is a shared goal: the completion of the tax audit without much delay and unnecessary use of scarce resources. Toward this common goal, the ideal is to maintain a balance between the pursuit of government's interest and the preservation of the taxpayer's rights. On the one hand, if revenue collection can be achieved faster, under an atmosphere of cooperation within the legal bounds, then fewer people and processes will be involved (e.g., the prosecution and adjudication in court are avoided). The government's resources that are freed up can then be channeled to other tasks that need as much if not critical attention. For the taxpayer, on the other hand, the short-term objective is to hurdle a tax audit with the least problems, while minimizing manpower and stress and avoiding potential risks of penalty associated with a subpoena. In the long run, all these efforts contribute to and remain consistent with the business objective of maximizing the bottom line. This was published on page B8 of the April 1, 2005 issue of the Philippine Daily Inquirer. This was posted in the Regine Velasquez fans yahoo groups. And other groups like S.O.P. and OPM. Posted by mmJun with the Music Inside Buzz web site. M. I. B. http://insidebuzz.tripod.com " So Regine fans and local music fans will be informed. " [ Post a Reply to This Message ]

[> [> [> [> Subject: TAX-FILES: No income tax return, no business Author: mmJun- Music Inside Buzz research/report [Edit] Date Posted: 01:58:51 06/26/05 Sun Author Host/IP: 222.126.7.90 TAX-FILES : No income tax return, no business Joel L. Tan-Torres, SGV & Co. Inquirer News Service / Mar. 18, 2005 THE RECENT issuance of two revenue regulations gives us a preview of what to expect in the near future. Revenue Regulations No. 3-2005 and 4-2005 were issued by the Department of Finance and Bureau of Internal Revenue (BIR) last February. These two regulations prescribe the submission of tax returns as a pre-condition for transacting with banks and government offices. Revenue Regulations No. 3-2005 mandates that all entities entering into government contracts must submit, along with the bid documents, the latest copy of the income tax return and business tax returns. Meanwhile, Revenue Regulations No. 4-2005 requires that all borrowers applying for a loan with banks must first submit a copy of its latest income tax return and financial statements. These new regulations clearly indicate that the BIR now is closely coordinating with other institutions to ensure that the parties that they are dealing with are paying their correct taxes, or at least, filing their tax returns. Right step The cooperation between the BIR and the government offices and banks is a step in the right direction. Various studies and reports have indicated that there are substantial tax leakages arising from those not reporting their correct taxes. Various reports indicate that tens of billions of tax leakages occur each year. This to a great extent is contributing to the growing fiscal problems of our country. In 2004, the budget deficit amounted to P186 billion. Therefore, efforts that are directed to plugging tax loopholes are necessary. This requirement of submission of tax returns as a condition for transactions with banks and government offices will help in reducing tax leakages. Transactions with government Revenue Regulations 3-2005 states "only tax compliant entities are allowed to enter into contracts with government." Implementing the mandate of Executive Order No. 398 which was signed by the President on Jan. 12, 2005, it is now required that "all persons, natural or juridical, local or foreign, desiring to enter into or participate in any contract with the government, its departments, bureaus, offices and agencies, including corporations, government financial institutions and local government units shall, as a pre-condition, submit, along with their proposal and/or bid, a copy of their latest income tax and business tax returns." Once this is fully implemented, hundreds of thousands, if not millions, of tax returns will be submitted by government contractors. The Regulations provides that all entities before entering into contracts with government offices must submit their latest (1) annual income tax return, (2) value-added tax or percentage tax returns covering the previous six months, and (3) tax clearance to be issued by the Collection Enforcement Division of the BIR. For new establishments that have no annual income tax return yet, the quarterly income tax returns may instead be submitted. It is also required that beginning May 1, 2005, only tax returns filed under the BIR's electronic filing and payment system (EFPS) will be accepted from government contractors. The government office must check the authenticity of the tax returns and clearance submitted. This can be checked by telephone at the BIR contact center or through the BIR portal. Furthermore, these offices must submit to the BIR a list of contracts and payments made to these contracting parties. The BIR can then use this to verify if these contracts are being reported for tax purposes. Loans with banks Revenue Regulations 4-2004 has practically the same requirements from bank borrowers. These regulations and Bangko Sentral ng Pilipinas (BSP, the central bank) Revised Circular No. 47 Series of 2005 mandate that a credit applicant and co-maker must submit a copy of their latest income tax return and financial statements. A borrower must also submit a waiver of confidentiality of client information and/or an authority of the bank to conduct random verification with the BIR in order to establish the authenticity of the tax return and financial statements. The banks must check the authenticity of the income tax returns and financial statements submitted. This can be checked at the BIR Contact Center or through the BIR portal. The banks must then consider the data/figures in the tax return and financial statement in the evaluation of the financial capacity and credit worthiness of the credit applicants. The BSP circular also provides that if the documents submitted prove to be spurious or incorrect, the bank may terminate the loan granted on the basis of these documents. The bank shall then have the right to demand immediate repayment of the obligation. Factors to consider Once these procedures are implemented, the BIR Contact Center and the Collection Enforcement Division (CED) will surely be receiving a lot of requests for tax clearances and authenticity check. These BIR offices should be in a position to respond on a timely and convenient manner. Failure to do so will unduly delay the implementation of business plans and transactions of affected parties. If these arise, complaints will be forthcoming. The requirement for government contractors to submit tax clearances is not contained in EO 398. This was included only in RR 3-2005. Securing a tax clearance is a long process and involves several steps: First, a government contractor files an application with the BIR. Hopefully, the BIR will find a convenient way of accommodating applicants from far away locations, such as Mindanao like allowing submission of applications by fax or mail. Next, the BIR will process applications received. It is important that the BIR allot resources to handle the volume to applications received. Then, government offices with contracts will have to authenticate the tax clearance submitted by contractors with the BIR. Some implementation issues that may crop up include: What if a government contractor is shown to have an unpaid tax liability? What if the unpaid accounts arose from cases protested by the taxpayer and which the BIR has not yet resolved. Will the contractor be barred from submitting a bid because of this unpaid account? EO 398 and RR 3-2005 both do not specify what the government office will do with the tax returns submitted by contract bidders. It is not clear whether the information in the tax returns will be considered by the government offices in the evaluation of the capacity of the contractor to qualify for the bid or contract. In government contracts that will be funded by foreign loans, it is expected that foreign contractors will submit bids. If a foreign contractor is not operating presently in the Philippines, it will not be able to submit a Philippine tax return that is a pre-condition to submitting a bid. How will this be handled? Government offices are required to submit a list of contracts awarded and payments to the BIR. There is no similar provision for banks to submit to the BIR a list of loan transactions. The trend The trend has started. More and more, the BIR is coordinating with other parties to monitor the transactions of taxpayers by requiring the submission of tax returns. News accounts even mention that the Department of Finance and the BIR will soon be asking the foreign embassies to require visa applicants to present the income tax return as a pre-requisite for the approval of the visas. Following this trend, is it a matter of time when we will have to first present our tax return before we can buy a car, open a bank account, purchase a house, invest in a club share, or fly abroad? M. I. B. http://insidebuzz.tripod.com " So Regine fans and local music fans will be better informed. " [ Post a Reply to This Message ]