THE call by foreign and domestic business groups to pass the proposed “Ease of Paying Taxes” bill has received “strong” backing from House Committee on Ways and Means Chairman Joey Sarte Salceda.
In a statement, Salceda said the passage of the measure will enable incoming Finance Secretary Benjamin E. Diokno to pursue his digitalization and modernization priorities for the tax agencies.
“We can do much in Congress; but we also need the motive force of the Department of Finance (DOF) on fiscal reforms. So, I hope Secretary Diokno will prioritize pushing for the Ease of Paying Taxes Act,” Salceda said.
The lawmaker added he guarantees that the House of Representatives “will almost certainly approve it again next time” noting that incoming Speaker [Ferdinand Martin G.] Romualdez was keen on the passage of that bill as Majority Leader.
“But the Senate often acts on fiscal reforms only when there is executive support,” Salceda said.
The lawmaker explained that he believes the bill, if enacted into law, will help Diokno “modernize the labyrinthine tax administration procedures by simplifying tax compliance, removing redundant and obsolete tax requirements, and lifting restrictions that prevent taxpayers from complying with tax laws remotely.”
Top of the list
IN a letter to the Senate dated May 18, 2022, chambers of commerce and business groups, including the Financial Executives Institute of the Philippines, requested the passage of several bills that have already been passed or approved at the Lower Chamber and just require the Senate’s counterpart approval.
The Ease of Paying Taxes bill, which Salceda principally authored, was atop the list of measures proposed in the letter.
The letter was signed by the American Chamber of Commerce of the Philippines, Australian-New Zealand Chamber of Commerce of the Philippines and the Bankers Association of the Philippines. Other signatories include: Canadian Chamber of Commerce of the Philippines; European Chamber of Commerce of the Philippines; Financial Executives Institute of the Philippines; IT and Business Process Association of the Philippines; Japanese Chamber of Commerce and Industry of the Philippines Inc.; Korean Chamber of Commerce of the Philippines Inc.; Makati Business Club; Management Association of the Philippines; Philippine Association of Multinational Companies Regional Headquarters Inc.; and, the Semiconductor and Electronics Industries in the Philippines Foundation Inc.
“You need a pro-taxpayer tax reform before we can enact other tax measures that will result in higher taxes or higher compliance. You want people to find it easy to pay taxes first, before you collect more taxes. That’s why the EOPT [Ease of Paying Taxes law] is crucial,” Salceda said. “And it is even more crucial given issues such as the Megaworld Corp. incident, which made evident the need for taxpayer rights protection.”
Burden eased
THE lawmaker also explained that at its core, ease of paying taxes is the most important ease of doing business proposal pending in Congress.
“Taxes are often the hardest part of doing business. So, you lift that difficulty, you ease much of the burden of businesses, especially small ones.”
The EOPT Act, which was transmitted to the Senate in September last year, proposes to amend the National Internal Revenue Code (as amended) by introducing administrative reforms that will simplify tax compliance and strengthen taxpayer rights.
The proposal gives the Bureau of Internal Revenue the power to create taxpayer classifications relative to the following: capacity to comply with tax rules and regulations; amount and type of tax paid; gross sales and/or receipts as well as inflation; volume of business, wage and employment levels; and, similar economic and financial factors.
Simplified rules
THE proposed EOPT bill also calls for the implementation of simplified tax rules and regulations for ease of compliance.
To simplify administration of the value-added tax scheme, the proposed EOPT law seeks to eliminate the distinction between the documentation and basis of sales as against services subject to VAT. At present, sales subject to VAT should be evidenced by invoices while services subject to VAT should be covered by official receipts. The EOPT bill makes the basis and documentation uniform to just be VAT invoices.
The EOPT law also proposes to add a provision that the P3-million VAT threshold, which was increased by Republic Act 10963 (Train Law), may be adjusted to its present value not later than January 31, 2021, and every three years after, based on the consumer price index published by the Philippine Statistics Authority.
“This would allow small businesses to grow without worrying about having to register for VAT if they are still unable to,” Salceda said.
Digitalization process
THE EOPT bill also proposes to allow the payment of the taxes before they are due. This impliedly allows payment of tax not necessarily simultaneous with the filing of the return.
Salceda said he sees the proposed EOPT law is aligned with Diokno’s priority of digitalization of the taxpaying process.
To allow full digitalization of the taxpayer experience, the EOPT bill proposes to delete various provisions in the Tax Code that require taxes to be paid in the Bureau of Internal Revenue offices or banks within the jurisdiction of the taxpayer’s legal residence, principal place of business or principal office, thereby giving taxpayers payment flexibility.
The proposed EOPT bill also seeks to introduce provisions on taxpayers’ rights in the Tax Code and create a taxpayers’ advocate office.
Salceda said that “by design, we really had small and medium taxpayers in mind when we were crafting this proposal.”
“The paperwork, face-to-face contact with tax authorities, audit issues, and compliance costs of MSMEs will dramatically reduce as a result of EOPT,” he said. “The removal of the need for the annual P500 taxpayer-registration fee alone will be savings for the smallest of businesses.”