When I was the Commissioner of the Bureau of Internal Revenue (BIR), I initiated the passage of a regulation that prescribed the submission of an accountability statement by the key officers and taxpayers. Following the lead of the Securities and Exchange Commission in mandating the management of entities to submit a Statement of Management’s Responsibility (SMR) for Financial Statements, Revenue Regulations (RR) 3-2010, dated February 26, 2010, provide for the submission of the Statement of Management Responsibility for tax purposes that shall accompany the financial statements submitted with the annual income tax return.The main thrust of this measure is to change certain mindsets of taxpayers and to promote greater levels of tax disclosures to the public.
This statement requires three senior executives of a business enterprise to acknowledge, by signing the document, that they, as management, are responsible for certain stipulations. In the SMR, the signors signify that they are responsible for all information and representations contained in all tax returns filed; ensuring that the tax declarations are prepared from properly maintained accounting books and records; ascertaining the compliance of their business with tax laws, regulations and issuances; and, reconciling the discrepancy of any disparity of the reported numbers arising from financial accounting standards and tax code accounting rules. This SMR could have been the pre-cursor of more transparent public disclosure of taxpayers.
A number of taxing jurisdictions around have instituted an analogous system of accountability reporting and representation. These include the Tax Transparency Code (TTC) of Australia, the Tax Transparency Standards of the Organization for Economic Cooperation and Development, and others. Tax transparency reports are recent and emerging developments in the tax community, which are intended to provide greater public disclosure of tax information by businesses. The TTC of Australia was implemented in 2016 and was then one of the most advanced and comprehensive tax transparency measures in the world. This tax transparency reporting and representation is a development that the BIR can consider as part of its tax administration program.
I note that with the Philippines and the BIR initiating a tax disclosure initiative as early as in 2010 with the SMR reporting, we could be one of the pioneering leaders in this initiative by now and reaping the benefits of this tax transparency reporting.
To be continued
Joel L. Tan-Torres is the Dean of the University of the Philippines Virata School of Business. Previously, he was the Commissioner of the Bureau of Internal Revenue, the chairman of the Professional Regulatory Board of Accountancy and partner of Reyes Tacandong & Co. and the SyCip Gorres and Velayo & Co. He is a Certified Public Accountant who garnered No. 1 in the CPA Board Examination of May 1979.
This column accepts articles for publication from the business and academic community. Articles not exceeding 600 words can be e-mailed to jltantorres@up.edu.ph.