Business groups oppose BIR rule on tax assessments

MANILA, Philippines - Several professional and business groups banded together to oppose the Bureau of Internal Revenue’s rules on due process requirement in the issuance of deficiency tax assessments.

The joint paper was signed by the Tax Management Association of the Philippines, the American Chamber of Commerce, the Association of Certified Public Accountants in Public Practice, the Integrated Bar of the Philippines, the Philippine Chamber of Commerce, the Philippine Institute of Certified Public Accountants, and the Makati Business Club.

These groups are urging the BIR to revisit the new rules and consider the arguments raised by taxpayers.

They said while they understand the BIR’s need to enhance tax compliance, intensify collection efforts, and streamline the assessment process, equal consideration must also be given to taxpayers’ right to due process.

Under the new rules, the notice for informal conference stage has been deleted from the procedure of issuing deficiency tax assessment.

The BIR would issue a preliminary assessment notice (PAN) if after its audit of the taxpayer’s books and accounts there is sufficient basis to assess the taxpayer for any deficiency tax or taxes.

A Formal Letter of Demand (FLD) and Final Assessment Notice (FAN) will be issued if the assessed taxpayer fails to respond within 15 days from the receipt of the PAN or 15 days from filing/submission of the taxpayer’s response.

The taxpayer must file a protest letter within 30 days from receipt of the FLD/FAN otherwise the assessment will be final and executory. A taxpayer must state whether the protest letter is a written request for reconsideration or written request for reinvestigation, whichever applies.

According to these groups, the very short period of time for analyzing the discrepancy tax assessments and collating the supporting documents essentially deprives the taxpayer of his constitutionally-protected right to due process.

The shortened period does not also allow BIR officers enough time to consider and review the documents and arguments presented to them by the taxpayers.

“The informal conference is considered to have evolved into “best practice” since it provides the taxpayers the opportunity to present their side of the case through submission of documents and discussion of issues with BIR personnel,” they said.

“The 15-day period for the issuance of the FAN/FLD after the PAN was issued does not afford the BIR ample time to carefully consider the taxpayer’s response to the PAN. Moreover, even if the taxpayer properly protests the tax assessment, the FAN/FLD will be automatically issued after the lapse of the 15 days,” they said.

They likewise objected to the imposition of 20-percent delinquency interest on top of the 20-percent deficiency interest, saying the double imposition of interest amounts to an unjust collection of an additional penalty, rather than compensation to the state for delay in the payment of the tax.