Bidding is a way of determining the price of a commodity in a free market economy. The more the bidders, the better would be the price.
Thus, the government resorts to bidding out its projects to qualified participants to get the best value. Private parties contracting with the government also benefit from transacting with the government.
On 12 January 2005, former President Gloria Macapagal-Arroyo issued Executive Order No. 398 (E.O. No. 398) directing all persons, natural or juridical, local or foreign, desiring to enter into or participate in any contract with the government shall, as a pre-condition, submit, along with their proposal and/or bid, a copy of their latest income and business tax returns duly stamped and received by the Bureau of Internal Revenue (BIR), and duly validated with the tax payments made thereon.
Subsequently, on 16 February 2005, the BIR issued Revenue Regulations (RR) No. 03-2005 to implement E.O. No. 398. Under RR No. 03-2005, all prospective participants to any government procurement of goods and services are required to submit, along with their proposal and/or bid, (1) a copy of their latest income and business tax returns, (2) summary list of contracts and payments made to contractors, and (3) tax clearance.
The first two requirements are easy to comply with because these documents are integral parts of the taxpayer’s business operations. However, the tax clearance is a headache to many prospective bidders because this is issued only by the BIR after it is ascertained that the taxpayer has no outstanding Final Assessment Notice and/or delinquent account with the BIR.
The newly issued Revenue Memorandum Circular (RMC) may be the medicine to the headache. RMC No. 58-2013, dated 30 August 2013, provides that the BIR may issue a Provisionary Tax Clearance (PTC) for bidding purposes in cases where (1) the taxpayer availed of the tax amnesty program and was issued a certificate of availment by the tax amnesty task force; or (2) the taxpayer’s case is still pending final resolution by the Court of Tax Appeals or the Supreme Court.
Please note however that the issuance of PTC is not automatic. Under RMC No. 58-2013, the BIR processing office is required to evaluate each application pursuant to procedures and guidelines enumerated in the said RMC. This is in light of the reports that some taxpayers indiscriminately appeal their cases to the courts even after the receipt of final decision denying their protests. The BIR clarified that it would only issue a PTC if the assessment for tax liabilities against a taxpayer is not yet final and executory.
Also, the issuance of PTC does not mean that the taxpayer will no longer be held liable for his tax liabilities. Taxpayers issued with the PTCs are still required to secure the appropriate tax clearance in order to be removed from the BIR’s Delinquent Taxpayers List.
Most often, the process of ascertaining the delinquency status of the taxpayer takes time and causes the delay of the issuance of the Tax Clearance.
Hopefully, the issuance of RMC No. 58-2013 will remedy the delay and pave the way for the participation of more bidders in government projects. With more bidders, the government stands a better chance of getting the best bid in its projects.
* * *
Jayson A. Dizon is an Associate from the Tax Group of Manabat Sanagustin & Co. (MS&Co.), the Philippine member firm of KPMG International.
This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.
The view and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or MS&Co. For comments or inquiries, please email manila@kpmg.com or rgmanabat@kpmg.com