THE (eBIR) ITR SAGA CONTINUES

Given the confusion brought about by BIR regulations prescribing the use of eBIR forms for ALL non-EFPS taxpayers (see previous blog post dated March 26, 2015), the BIR issued yesterday two (2) Revenue Memorandum Circulars (RMCs) that seek to clarify the many questions posed by taxpayers.

There is RMC 11-2015, which clarified what the BIR meant by including "accredited tax agents/practitioners and all its client-taxpayers" among the mandatory coverage of online eBIR forms. Under this RMC, those required to do the electronic filing are accredited tax agents/practitioners, who are authorized to sign and file the tax returns on behalf of their clients. 

This clarification came about in light of questions posed by many tax accountants who prepare ITRs for their clients. As clarified, when a taxpayer hires a tax accountant/agent to prepare his tax return BUT the same taxpayer signs his own tax return, the client-taxpayer would NOT be required to electronically file his eBIR forms.

Meanwhile, RMC 12-2015 granted much-needed relief to the following taxpayers by allowing them to manually file pre-printed or PDF/Excel file tax returns:

• Senior citizens and persons with disability (PWDs)
• Salaried workers filing BIR Form 1700 with taxes fully withheld by the employer (i.e., no additional tax due)
• Salaried workers who opt to file ITRs, even if they are qualified to no longer file them, due to personal reasons, such as foreign travel, promotion, scholarship, etc.

Considering that the tax risk for these types of taxpayers is very low, it is but proper that they be spared from the new eBIR filing requirement.

While these two (2) latest BIR issuances were able to address certain taxpayer concerns, the call to defer the mandatory use of eBIR forms (be they offline or online) still remains very valid today. 

April 15 is just 15 calendar days away.  With three (3) non-working holidays and four (4) days on a weekend, this gives taxpayers just seven (7) working days to prepare their ITRs before the deadline. 

However, there still is so much confusion on the part of taxpayers on how they can properly comply with the current ITR requirements.  Even BIR RDOs and accredited banks, which are tasked to receive the ITR forms, are confused as to what forms to accept and, to play safe, many of them only accept eBIR forms and refuse all other kind of ITR forms.  

All of these concerns stem from the lack of consultation and adequate time for education of the various stakeholders to the ITR change process, such as the taxpayers, RDOs, and accredited banks. 

The best way to ensure compliance to any new tax rule is by involving stakeholders in the change process. This can only be done by cascading information way beforehand on any forthcoming major change in tax rule or policy.  This will allow the stakeholders in the tax system to fully understand how it impacts them and enable them to plan how they can best comply with it.

The first step toward change is awareness. 

The second step is acceptance. 

~Nathaniel Branden

Today taxpayers continue to call on the BIR to defer the full implementation of the eBIR ITR forms this tax filing season.

In a letter dated March 30, 2015, the Tax Management Association of the Philippines (TMAP) formally requested the BIR to defer the full implementation of the eBIR ITR forms until after April 15, 2015.  TMAP also suggested that, at the very least, it should be made optional at this time with a gradual phase-in implementation.

We continue to hope and pray that the BIR will listen to the voice of confused and weary taxpayers, many of whom would only want to contribute their fair share in nation-building.  

Let us watch as the saga continues to unfold in the coming days.

THE CONFUSING CASE OF (eBIR) ITR FORMS

There has been a lot of confusion lately regarding the ITR forms to be used this tax filing season. Taxpayers have started to panic upon hearing the news that everyone would now have to use electronic forms in their annual ITR filing this year.  

This mainly stemmed from the BIR's issuance of Revenue Regulations (RR) 5-2015, which prescribes the mandatory electronic filing of eBIR forms by certain types of taxpayers, including "No Payment" returns, and imposing penalties on them (see previous blog post dated March 23, 2015).

However, this new regulation simply amends a previously-issued regulation, RR 6-2014, which mandates the use of eBIR forms for ALL other taxpayers that are not under EFPS. (Note: The Electronic Filing and Payment System is applicable only to large taxpayers and other top taxpayers upon prior notice by the BIR). 

Starting September 1, 2014, the BIR no longer accepted pre-printed tax forms (even those printed through a PDF/Excel file) for the monthly business tax and quarterly income tax return filings. Instead, taxpayers would need to have a computer with internet connection and encode their tax return details using either the offline or online eBIR forms. 

And what is the difference between offline and online eBIR forms? The forms are the exactly the same and the differences arise in the supposed taxpayer-users, the manner of access, and the mode of filing/payment.  

Please see below for a quick guide.

*Mandatory non-EFPS taxpayers for online eBIR forms include the following:(1) Accredited Tax Agents/Practitioners and all its client-taxpayers; (2) Accredited Printers of Principal and Supplementary Receipts/Invoices; (3) One-Time Transaction (ONETT) taxpayers; (4) Those who shall file a “No Payment” Return; (5) Government-Owned or -Controlled Corporations (GOCCs); (6) Local Government Units (LGUs), except barangays; and (7) Cooperatives registered with National Electrification Administration (NEA) and Local Water Utilities Administration (LWUA)

However, upon checking the BIR site, the online eBIR forms are still NOT yet available up to now.  Apparently, the BIR's system is not yet technically ready at this point to implement the online eBIR forms filing. With this, various BIR Revenue District Offices (RDOs) have advised taxpayers to use the offline eBIR forms until further notice that the online system is already available. 

Meanwhile, come April 15, it is expected that, aside from self-employed and professionals, there will be a huge influx of salaried workers who need to file their annual ITRs -- i.e., they do not qualify for exemption from ITR filing, unlike regular salaried workers who only have one employer during the year and do not have other sources of income. 

These annual ITR filers usually include:

• Those with mixed income -- i.e., salary plus income from other sources
• Those with two or more employers during the year -- this is the usual case for BPO workers.

There are also salaried workers who, even if they qualify for exemption from ITR filing, personally need to file their ITR as a financial document either for travel, loan, or  government promotion purposes.

For all these types of individual taxpayers, they would have to now use eBIR forms in filing their ITRs, much to their surprise. 

While we understand the BIR's thrust towards a more effective and efficient tax collection system using electronic means, the BIR must also understand that not all taxpayers would be readily equipped to shift to this new electronic mode of ITR preparation/filing.

Not all would have computer/internet access and, even if there are BIR e-lounges, not all would be computer literate. Currently, there are also some technical and capacity issues that the BIR needs to resolve in order to ensure that its system can properly handle the deluge of ITR filers during this season. 

With this, let us continue to hope and pray that the BIR will soon reconsider its prescribed electronic procedures in this year's ITR filing.  Rather than immediately mandating the use of eBIR forms this April 15, the BIR should instead provide taxpayers with various options on the mode of ITR filing/payment that is most convenient for them, including allowing the taxpayers to revert back to the previous pre-printed or PDF/Excel file tax forms.  This is the only way that we can encourage greater tax compliance and not dissuade taxpayers from fulfilling their tax obligation as good citizens of this country.

LAST MINUTE SURPRISES FOR APRIL 15

April 15 is only about three (3) weeks away and just like last year, when totally new income tax return (ITR) forms were suddenly released and mandated for use by the BIR, taxpayers once again received some last-minute surprises before this year's ITR filing deadline. 

Just this March, the BIR issued two (2) new revenue regulations (RRs) that prescribe new requirements for large and small taxpayers and both RRs will greatly impact on affected taxpayers during this year's ITR filing season. 

One of these regulations, RR 2-2015, involves the requirement for digitized submission of certificates of taxes withheld (CTWs) to be claimed as tax credit by large taxpayers against their income tax payable. This new requirement took effect last March 21, 2015.

While large taxpayers would normally welcome the submission of documents in digital format, this is not the case for RR 2-2015. With this new rule, large taxpayers will have to manually scan each of the hundreds and even thousands of certificates that they receive from customers, arrange each one of them with a specific file name format, and submit the files via DVD to the BIR. 

With this new requirement, BIR personnel will avoid receiving and stamping truckloads of CTWs during the filing season. However, the requirement for scanned files will definitely result to additional work and costs on the part of large taxpayers, not to mention the fact that they still need to maintain the hard copy of all those certificates in the event of BIR audit.   

Meanwhile, another new regulation, RR 5-2015, mandates certain types of taxpayers to file their returns using the BIR's eBIR forms facility. These include those with "No Payment" returns and One Time Transaction (ONETT) taxpayers, among others. Under this new rule, taxpayers who fail to comply will be imposed a penalty of P1,000 per return and additional civil penalty of 25% of the tax due. 

With this new regulation, the BIR hopes to facilitate the electronic submission of tax returns and minimize the manual filing at the BIR offices. However, while this is envisioned to make it more convenient for taxpayers to file their tax returns, the new regulation provides that it shall take effect immediately, despite the fact that the RR was only issued last March 17, 2015 (although an initial regulation, RR 6-2014, was already issued in 2014).

In both cases, the BIR mandated these new rules with less than a month to go before April 15. Many affected taxpayers are now at a loss on how to best comply with the new tax filing requirements, aside from encountering certain technical difficulties and raising certain practical issues along the way. 

Unfortunately, the BIR has confirmed that these new rules will already apply in time for the April 15 ITR filing for taxable year 2014. It is made even worse for affected individual taxpayers, who also need to file their 1st Quarter ITRs on April 15.

While it is important that the BIR is able to capture tax information in a timely and efficient manner, especially through electronic means, let us not forget that one of the most basic taxpayer rights is the right to be informed, assisted and heard. 

It is very important for for taxpayers to properly understand new tax rules with sufficient lead time for taxpayer education and cascade of information. This becomes even more important considering that public hearings are no longer conducted by the BIR prior to the issuance of new regulations, unlike before. 

Taxpayers should be given sufficient time to adjust their systems and processes so that they can best comply with the new tax filing requirements. The BIR should also have more than enough lead time to properly conduct a tax information campaign among taxpayers and hear out various taxpayer concerns.  

Given this, we need to appeal to the BIR to defer the implementation of these new regulations until after this April 15 tax filing season. At the very least, these should be made optional at this point, rather than mandatory.  

Otherwise, giving Filipino taxpayers less than a month before April 15 to prepare and comply with these new tax regulations is like setting them up for failure.

FULL CIRCLE ON WORKERS' TAX EXEMPTION

Last January 28, 2015, I officially ended my term as President of the Tax Management Association of the Philippines (TMAP), the premier organization of tax professionals in the country.

It was a busy year for TMAP. Aside from having to contend with controversial BIR issuances, such as Revenue Memorandum Circular (RMC) 54-2014 on VAT Refund claims, TMAP found itself deeply immersed in the tax reform campaign -- particularly, in pushing for the new law increasing the tax-exempt bonuses of salaried workers from P30,000 to P82,000 and the lowering of personal income taxes.

Looking back, I realized that TMAP has come full circle, especially in its tax advocacy for the tax exemption of workers.

Way back in 2008, a new tax relief package was enacted into law. Minimum Wage Earners (MWEs) were given tax-exemption while, personal and additional tax exemption amounts were increased. Unfortunately, the BIR decided to interpret the law in such a way that they limited the tax exemption of MWEs and pro-rated the additional tax exemptions during the initial year of implementation.

TMAP made stand that full tax exemption should be given to MWEs while, the increase in tax exemptions should be fully implemented (i.e., not pro-rated) for taxable year 2008. It also allied itself with other business and professional groups for a joint statement on the issue and, together with lawmakers, TMAP co-signed a petition with the Supreme Court to question this BIR regulation.

Fast-forward to 2014.  TMAP highlighted the need to lower income taxes when it published a comparison of tax rates within the ASEAN region, which showed that the Philippines effectively has the highest income tax rates in the region. 

TMAP also supported the various bills in both Houses of Congress, which pushed for the increase in tax-exempt bonus threshold and the revision of the income tax table for individuals. 

 Revised Income Tax Table for Individuals proposed by TMAP

Then, last February 2015, after much pressure from the DOF/BIR to veto it, the President finally signed into law Republic Act (RA) No. 10653, which increases the tax-exempt bonuses from P30,000 to P82,000. What a sweet initial victory for taxpayers!

What's more, just the other day, BIR already issued Revenue Regulations (RR) No. 3-2015, the implementing regulations of RA 10653. It is heartening to know that the BIR properly implemented the new law in accordance with the intent of legislation -- that is, to make the additional tax  exemptions available in full for bonuses and other benefits paid or accrued starting January 1, 2015. 

Given this initial tax relief measure, it is now time to focus our efforts on pushing for more meaningful and significant tax reforms in this country. 

Salaried workers have long borne the brunt of tax collections. It is about time that the Government provides much-needed relief, especially for the low and middle-income taxpayers who have suffered from the unadjusted tax brackets for almost two decades now. We badly need to revise the income tax table for individuals to reflect the adjusted tax brackets considering changes in inflation rate and to lower tax

Meanwhile, we also need to simplify the tax system to pave the way for greater compliance from the business income-earners and professionals. This will greatly help in expanding the very narrow tax base of individual taxpayers, which currently consist mainly of salaried workers. 

There are still a lot of things to do with so little time in our hands. If we are to pass a new tax law, we only have this small window of opportunity between now and June of this year, before the election fever sets in. 

While the workers' tax exemption has come full circle only after 7 years, let us continue to hope, dream and pray that tax reform will soon be a reality here in our country. 

And this should start NOW, not after 2016.