Foreign and local businessmen rejected salient features of the proposed Tax Incentives Management and Transparency Act (Timta), including the electronic-filing (e-filing) requirement of the Bureau of Internal Revenue (BIR); the slapping of “steep” penalties for nonsubmission of incentive claims during the prescribed period; and an extension of the BIR’s assessment period. In a position paper released to the media on Sunday, 14 local and foreign business groups, representing 35,000 businesses in the country, identified the provisions they want to scrap in the House of Representatives’s version of the contentious Timta.
Local and foreign businessmen opposed the e-filing of income-tax returns (ITRs), saying that such practice “may change from time to time, depending on the applicable or existing regulations of the BIR.”
The Department of Trade and Industry (DTI) and the Department of Finance (DOF) agreed on a mandatory e-filing for all investment-promotion agencies (IPAs)-registered enterprises for up to six months, after the annual April 15 deadline.
Board of Investments (BOI) Governor Lucita P. Reyes said e-filing could burden small and medium enterprises without much access to computers, as well as the instability of the BIR’s online system.
Businessmen also proposed to reduce the penalties for failure to submit application for incentives with the BOI and other IPAs, from forfeiture of incentives to fines ranging between P1,000 and P50,000.
“Forfeiture of incentives for merely failing to timely file an application for incentive claim is unduly harsh and disproportionate to the minor infraction, and hence, confiscatory,” the businessmen said in their letter.
Also, the groups are appealing for the removal of the provision to extend BIR’s assessment by another 18 months, on top of the three years given to the revenue agency under existing laws.
“Both IPA-registered enterprises and regular corporations are bound by law to file their annual ITRs on the same date, that is, April 15, hence, the three-year prescriptive period for the BIR to make an assessment from the filing of the income tax return is already a reasonable period. Both are bound by the same deadline for the filing of their respective audited financial statements,” the group said.
“The 1997 National Internal Revenue Code [NIRC] imposes upon the BIR a time period within which to make an assessment and enforce collection. Beyond this statutory period, the BIR loses its right to issue an assessment or enforce collection,” they added.
Extending the BIR’s period of assessment by 18 months is a concession of the House of Representatives’ Ways and Means Committee to the DOF and DTI.
Originally, the assessment period of the BIR was only three years.
The 18-month period would allow companies to file claims for incentives with the BOI after filing their ITRs and enable the BOI to validate their incentive claims.
Reyes said the validation period is needed in order to assess the amount of incentives that registered companies are entitled to, as not all the incentives that companies claim are approved. The BOI disallows incentives on activities that are not related to the companies’ main registered activity, like the interest income of a company.
Aside from these recommendations, businessmen also want to clarify the extent and scope of the reporting in the Tax Incentives Information section in the Department of Budget and Management’s Budget of Expenditures and Sources of Financing (BESF).
“The information to be published should also include such matters as the employment generated, the amounts invested [and hence risk assumed], the products/services made available to the economy/public, and even all the other taxes actually paid by the concerned taxpayers/entities,” the
businessmen suggested.
Last, the businessmen also asked for a clear delineation of the responsibilities of the BOI and the BIR.
“In many instances [and this has become a consistent practice of the BIR] the BIR disallows incentives even if these are already approved by the BOI or IPAs. The BOI and relevant IPAs have exclusive jurisdiction to determine eligibility for investment incentives. In at least two decided cases, the Supreme Court held that the BIR cannot question the incentives given by the BOI/IPAs as this is beyond the BIR’s authority. Notwithstanding these decided cases, the BIR continues to encroach on the BOI/IPAs jurisdiction to determine eligibility for incentives,” they said.