BIR: Probe LGUs’ unremitted taxes
The gallant men and women of the Bureau of Internal Revenue are leaving no stone unturned in hitting their revenue goals or collection targets. Despite all their wholehearted efforts, however, the BIR, as a whole, had little success in both.
These shortfalls can be largely attributed, however, to the perpetually increasing annual targets brought about by the national government’s continually ballooning annual budget. To the present administration’s credit though, they are the first to hit the trillion pesos mark and that’s laudable. Henceforth, they may hit or miss their goals and targets, yet, with all certainty, their collections will constantly rise year after year.
They felt though that there could be inefficiencies somehow in the collection aspects. So that, running after the popular and known huge earners like Congressman Manny Pacquiao and other celebrities never came as big surprises. After all, they are known to flaunt their wealth. Therefore, evidences are as clear as daylight. As these celebrities’ assets increase, the BIR will surely look into the earnings they used to acquire these and whether taxes have been paid on those. These initiatives, plus the psychological impact brought by it, will surely add impetus to the BIR’s vigorous “Register, File & Pay” campaign.
Systematically, however, in trying to effect collection efficiency, the BIR released in 2012 a Revenue Memorandum Order (RMO No. 19-2012) prescribing the policies and procedures for the value added tax audit program for large taxpayers. Nearly perfected, the BIR focusing on the VAT system never came as a surprise too. In fact, through such VAT system, deficiency income taxes and withheld taxes that have remained unremitted may even be uncovered. What is surprising though is the BIR’s lackadaisical attitude towards examining local government units for unremitted taxes. It is publicly known that LGUs are tasked not only to withhold taxes on income payments but VAT as well. Knowing fully well the extent by which internal revenue allotments are spread and spent throughout (provinces down to the barangays) the political subdivisions and the propensity of implementing huge infrastructure-related projects in most LGUs, their collected VAT must be in billions. The question is - are they religiously remitting these withheld taxes to the BIR? The answer is an absolute NO.
Truth to tell, in a landmark decision, the Court of Tax Appeals ordered the City Government of Makati on December 16, 2009 to pay the Bureau of Internal Revenue PhP1.2 Billion in deficiency taxes. The CTA ordered them to pay the BIR the amount of PhP1,046,833,846.08 and PhP217,807,339.66, representing its deficiency taxes for taxable years 1999 to 2001, and taxable years 2002 to 2004, respectively. This decision is an off-shoot to an assessment issued to the City of Makati by the BIR’s Makati Regional Office for deficiency Withholding Taxes on Compensation, Expanded Withholding Tax, Value-Added Tax and Withholding Tax on VAT for the years 1999 to 2004.
Notably, LGUs are exempt from internal revenue taxes. As such tax-exempt entity, these assessments represent largely withheld income taxes from employees and withheld income taxes and VAT from suppliers of goods and services that were not remitted. As deputized collection agents, they were supposed to remit these collected taxes. Despite these unquestionable provisions, then Mayor Jejomar Binay was so adamant and did not remit it. Incidentally, this could be true too in other LGUs.
In considering this avenue for increased tax collection, let us give value to these facts. As of this date, our nation comprises 81 provinces, 144 cities, 1,490 municipalities and 42,028 barangays. In all, we have 43,743 LGUs. This simply translates to 43,743 tax withholding agents. That’s a lot. Some of them (especially the barangays) may have not withhold taxes at all from their suppliers for lack of education. Some, like then Mayor Jejomar Binay, must have withheld but never responsibly remitted it.
Clearly, therefore, it is imperative that the BIR (or through some NGOs like the Philippine Institute of Certified Public Accountants) should be patient enough to educate the inadequately trained or the ill-equipped but politically connected treasurers in the barangays. Then, henceforth, the BIR should throw the book at them.
Moreover, being both under the Department of Finance, the BIR can easily seek help from the Bureau of Local Government Finance to enforce timely remittances. As we all know, the treasurers of LGUs (excluding barangay treasurers) are under BLGF. Therefore, through these treasurers, remittances of withheld taxes should not be difficult.
More importantly, these LGUs should be reminded that the funds that they are keeping are taxes paid by honest-to-goodness taxpayers. These are not theirs and are not for their LGUs’ use. As government units themselves, they should set good examples by remitting it. They should practice what they preach, so to speak.
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