BIR seeks cut in optional deductions for corporations

MANILA, Philippines - The Bureau of Internal Revenue (BIR) is set to seek the reduction of the optional standard deductions allowed for corporations to 10 percent of gross sales to put less pressure on the government’s deteriorating fiscal condition.

In a letter to Finance Secretary Margarito Teves, BIR officer-in-charge Joel Tan Torres said amendments should be made on RA 9504 or the tax relief act as the government stands to forego at least P4.1 billion in potential tax collections.

Tan-Torres said proposed changes to the law include the reduction of the optional standard deduction (OSD) for corporate taxpayers to 10 percent from 40 percent.

Congress is set to hear proposed amendments to RA 9504 for the application of the Simplified Net Income Tax Scheme (SNITS).

“In view thereof, may we request to possibly include in the amendment the reduction of OSD for corporation from 40 percent to 10 percent considering the P4.1-billion estimated loss in revenue,” the BIR chief asked Teves.

The law was signed by President Arroyo last June to exempt minimum wage earners from paying income tax and at the same time increases personal exemptions for individual taxpayers.

It also gave self-employed and professionals as well as corporation a chance to opt for OSD in the amount not exceeding 40 percent of their gross sales or receipts in paying their income tax.

The OSD simplifies the filing of income tax returns, and benefits, in particular, professionals and medium, small and micro entrepreneurs. It also encourages businesses in the underground to operate above-ground, therefore enhancing tax compliance 

The BIR is hard pressed for tax revenues as the country’s slackening economy brought about by the global economic meltdown together with several revenue eroding measures including the tax relief law has pulled down the agency’s tax take.

The agency is tasked to collect P798.5 billion this year but has so far collected only P557 billion from January to September this year or P39.2 billion short of the programmed collection of P596.2 billion in the same period last year.

This resulted in a record level deficit of P237.5 billion in the first nine months of the year eclipsing the previous record level of P210.7 billion incurred in 2002.

The government sees the deficit hitting a record level of P250 billion or 3.2 percent of gross domestic product (GDP) this year from P68.1 billion or 0.9 percent last year due to the full impact of the global economic meltdown.

The BIR has launched controversial programs including the imposition of five-percent withholding tax dubbed as “Project Iboto Mo” that expects to raise P1.4 billion as well as the “SanTax Claus” project in bazaars, exhibits, and trade events.