PUBLICLY-LISTED property developer Megaworld Corp. is still not yet off the hook as the Bureau of Internal Revenue (BIR) – Large Taxpayers Service will now be the one auditing the sale of Taguig properties that the company is developing under its joint venture (JV) with state-run Bases Conversion and Development Authority (BCDA).
Speaking before the House Ways and Means Committee on Monday, Finance Assistant Secretary Dakila Napao confirmed that the BIR will still look into the issues related to Megaworld but this would no longer be done by the special audit task force following Finance Secretary Carlos G. Dominguez’s recent suspension order.
The Department of Finance (DOF) on Saturday announced that the revenue special orders and operations memoranda creating special audit task forces were suspended to avoid confusion among taxpayers.
Asked by House Ways and Means Committee Chair Albay Rep. Joey Salceda whether the BIR Large Taxpayers Service will be auditing Megaworld, Napao said: “Yes, Mr. Chair. That is the instruction.”
This came days after the BIR released a media advisory announcing that it would supposedly issue a closure order against Megaworld Corporation.
However, the BIR later in the day advised the media that the event was “held in abeyance until further notice” as Megaworld vowed full cooperation in complying with the taxman’s requirements.
Prior to the suspension of the creation of special audit task forces, BIR Regional Director Eduardo Pagulayan, Jr. of the agency’s Revenue Region 8-B said during the hearing that it was looking into the properties owned by BCDA which were being developed by Megaworld.
The joint venture that was the subject of the dispute is the one Megaworld signed with the BCDA in 2009 regarding the development of Taguig properties.
On top of this, Pagulayan said the joint venture between Megaworld and BCDA was not also registered with the BIR.
He said Megaworld initially refused to give their records for the audit done by the special task force, prompting BIR’s plan to issue a closure order against the company.
Megaworld: We were responsive
However, Megaworld Executive Vice President and Chief Strategy Officer Kevin L. Tan argued that they have been responsive since the first letter of authority was issued by BIR.
Megaworld Head of Corporate Advisory and Compliance Division Maria Carla T. Uykim also stressed that the taxman denied the company due process because they were not notified about the supposed issuance of the closure order and they were not given the time to hear their side.
“There is normally a notice to the taxpayer that the closure order is recommended to be implemented. There is a period for the taxpayer to explain itself. So if the BIR feels that the explanation of the taxpayer is sufficient, then it can desist from the issuance of any closure order. This, Your Honor was never afforded to Megaworld,” Uykim said.
Megaworld said they have been raising the issue of jurisdiction of the BIR regional office to conduct the audit on their properties.
For his part, Salceda said in a separate statement that the House tax panel’s probe on the Megaworld tax dispute issue reached “a way forward” on what are the needed legislation and tax administration rules to ensure that similar incidents are avoided in the future.
“I am thus pleased to report to the public that we now have a way forward, which the committee will recommend to the tax agencies,” Salceda said.
Salceda said his three main recommendations include the need for a promulgated common procedure on taxpayer dispute, codifying the rights and responsibilities, as well as timelines and procedures, for resolving taxpayer disputes on jurisdiction, coverage, applicability and other
matters.
He stressed the need to simplify and finalize the rules on whether joint ventures should be registered as separate entities for tax purposes.
“The situation seemed to arise primarily out of a confusion as to whether Megaworld or the BCDA should settle the taxes on their joint venture. The best solution is to just require JVs to be registered as separate taxpayers,” he said.
On the issue of jurisdiction, Salceda also proposed putting up all large taxpayer transactions in the Large Taxpayer Service “but they can coordinate with and utilize the revenue district offices and regional offices to help.”
“Third, is the issue of jurisdiction. While I thank the DOF for putting a stop to revenue special orders which caused some of the confusion, the suspension isn’t a permanent solution. We need to clarify who is responsible for what, in codified issuances,” he said.
“In the long run, though, we need to codify revenue regulations. That will probably take some herculean effort to review, revise, and compile all tax regulations, but that will also avoid all this confusion about rules,” he added.