Tax Code amendments pushed

MANILA, Philippines - The Tax Management Association of the Philippines (TMAP) is seeking amendments to the Tax Code to safeguard the rights of taxpayers and limit the power of the head of the Bureau of Internal Revenue to interpret tax laws and to decide tax cases.

In a position paper submitted to the Senate and House ways and means committee, the TMAP proposed a number of changes to the National Internal Revenue Code of 1997 to “ensure that proper consultation and due process are observed” by the BIR, which has issued decisions that effectively nullified long-standing precedent rulings.

“It has been observed that the Department of Finance and/or the Bureau of Internal Revenue have released numerous issuances which “re-interpreted” certain provisions of the Tax Code, resulting in unauthorized administrative legislation which, apart from undermining the rule of law are unjustly onerous and oppressive to taxpayers. These administrative legislations mark a significant departure from long established best practices which have guided both the taxpayers and the BIR in the interpretation and implementation of tax laws,” the TMAP said.

These inconsistent rulings, TMAP said, have “deleterious effects on businesses” and are a “disincentive for local and foreign investors who are unable to rely on a fair, reasonable, consistent, and stable tax system.”

TMAP said the power of the commissioner to interpret tax laws must not encroach upon the exclusive power of the Finance secretary to promulgate rules and regulations.

Aside from this, the TMAP is also seeking the reduction of the creditable withholding tax rate to a reasonable level, noting that taxpayers end up perennially in excess tax credit position because the normal income tax is based on gross income less deductions.

Only income subject to the normal tax should be subject to withholding tax to avoid excess withholding tax.

TMAP explained that withholding taxes remitted to the BIR by the withholding agents are often disallowed as a tax credit through no fault of the income recipient/ earner.

“For example, the BIR disallows the tax credit if there is a timing difference between the withholding of the tax and reporting of the income or the collection of the physical certificates of creditable withholding tax. To avoid unjust enrichment on the part of the government, i.e., disallowance of a valid tax credit by mere technicality, the income earner/recipient should be given the option to self-withhold to ensure that any tax paid in advance to the government through the withholding tax system can be credited against income tax liability,” TMAP said.

TMAP said deductions should be allowed in cases of non-withholding or under- withholding of the tax, provided the withholding agent pays the tax.

Moreover, the TMAP also proposed the imposition of a penalty on BIR’s inaction on claims for refund.

“If the commissioner fails to grant a refund or issue a tax credit certificate within the prescribed period, the claim shall be subject to interest, which shall accrue from the expiration of the 120-day period until the full payment of the refund,” TMAP said.

TMAP is an association of tax consultants and corporate tax practitioners, which aims to professionalize tax practice and provide a channel by which the private sector may actively participate in the drafting of tax laws, rules and regulations.