BIR unearths tax avoidance schemes by some conglomerates

MANILA, Philippines - The Bureau of Internal Revenue (BIR), the government’s main revenue collection agency, has unearthed tax avoidance schemes employed by some conglomerates, sources from the agency said.

While the sources refused to name yet which conglomerates have been doing this, the BIR said the findings are part of a special audit of at least 18 conglomerates it started last year.

“There have been various tax avoidance schemes. It may not necessarily be considered tax evasion but it would fall under tax avoidance,” said one source.

BIR Deputy Commissioner Estela Sales, in a separate interview, said the agency hopes to conclude its review this year and address the corresponding problems.

Another source said an under-declaration of taxable income by at least 30 percent would merit the filing of criminal charges.

The tax agency is continuing a program started during the time of Commissioner Joel Tan-Torres.

In 2010, Tan-Torres put in place tax measures for conglomerates by assigning a group from the large taxpayers group of the BIR to focus on these corporations.

Among the schemes unearthed by the BIR include practices of inter-company charges and transactions among related parties and the creation of bogus suppliers or companies within the conglomerate that serve as suppliers so that the group can lower its deductible costs.

Conglomerates are groups of related corporations with diversified business activities in different industries that are controlled and operated by a parent corporate entity.

The special team of revenue officers under the special audit teams has been undertaking simultaneous, joint and coordinated examinations of the books of accounts of these identified taxpayers, covering all internal revenue taxes.

Sales said that after the investigation, the BIR is expected to issue new guidelines that will govern the tax treatment of transactions of conglomerates.

The BIR has a goal to collect P1.066 trillion this year, from P940 billion last year.

Sales said an audit among the country’s conglomerates could yield hefty revenues for the BIR especially if there is under-declaration committed by these companies.

The BIR is stepping up efforts to raise revenues, going after different sectors which may have avoided paying the right amount of taxes in the past.