THE Bureau of Internal Revenue (BIR) has unveiled a tool that will address low tax effort ratio in the country which translates to a revenue loss of around P218 billion per year.

The Benchmarking Project will help the BIR increase voluntary compliance on the part of taxpayers by looking into their level of compliance through their various declarations with the tax agency.

Internal Revenue Commissioner Kim Jacinto-Henares said the project is part of good tax administration wherein one should be able to know who the taxpayers are and whether they are registered and reporting the right income and paying the right amount of taxes.

Benchmarking gives the tax agency an idea of whether  a taxpayer is paying the right amount of taxes by comparing its compliance level with the standards or benchmarks established from among the taxpayers within a particular sector or industry (e.g., real estate, restaurants).

She further added that this tool will help the BIR identify who should be audited first and in the process, increase compliance.

Benchmarking is basically a measure or tool to detect tax leakages and improve collections on value-added tax, income and other taxes. The tool will help plug the loopholes and increase voluntary compliance resulting into higher tax collections and thus, higher tax effort ratio.

Increasing revenue collections through this approach is in line with President Aquino’s “no new taxes” policy.

Under the project, a taxpayer found to be below industry benchmarks will be issued a Benchmarking Letter Notice to rectify his tax returns and improve tax compliance. The notice will also give the concerned taxpayer the chance to rebut or prove otherwise the findings of the BIR.

The benchmarking project will be implemented nationwide starting with a series of regional road shows. Each of the Revenue District Offices of the BIR nationwide will be coming up with benchmarks for each sector or industry within their respective areas of jurisdiction.