Ease of Paying Taxes bill seen passed before January 1

THE chairman of the House Committee on Ways and Means has assured the passage of the Ease of Paying Taxes bill—expected to boost the country’s exports and trade—before New Year’s Day.

Albay Rep. Joey Sarte Salceda made this assurance in a message to 6,000 attendees of the 77th Annual National Convention of the Philippine Institute of Certified Public Accountants (Picpa) in Cebu City.

Salceda said he is optimistic that the bill, which is pending in the 19th Congress, will be enacted into law before January 1, 2023, when most of the bill’s important provisions “could be implemented with the best possible timing.”

“[The] Train [Tax Reform for Acceleration and Inclusion law or Republic Act 10963] is cutting personal income taxes across the board by around 5 percent by January 1, 2023. So, we hope to couple that with a few other provisions,” the lawmaker was quoted in a statement as saying.

Among the provisions Salceda hopes to have implemented by the start of next year is the indexation of the VAT-exempt sales threshold to the annual consumer price index.  The threshold is currently at P3 million.

“The threshold has not been updated for several years already and no longer responds to the needs of businesses,” said the solon. “The threshold for what is considered a ‘small corporation’ in the tax code is P10 million in sales. It doesn’t make sense that the VAT [value-added tax] threshold stagnates.”

Unified requirements

SALCEDA also seeks to unify documentary requirements for VAT into the sales invoice, as opposed to the current system of requiring official receipts for goods and sales invoices for services.

The lawmaker doing so would “reduce the documentary discrepancies and make electronic invoicing easier.”

“Easier invoicing means faster VAT refunds; [this] makes our export sector more competitive.”

Under the current system, indirect exporters are liable to VAT but are expected to pass this on to direct exporters who, in turn, can recoup their VAT costs through the 90-day VAT refund system.

This, Salceda said, was supposed to address VAT leakages, “but could actually harm export competitiveness and actually reduce the volume of trade and downward linkages, and therefore, actually lead to lower tax collections.”

The EOPT bill 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 power to the Bureau of Internal Revenue 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 EOPT bill also calls for the implementation of simplified tax rules and regulations for ease of compliance.

To simplify VAT administration, the bill 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 bill makes the basis and documentation uniform to just be VAT invoices, according to Salceda.

The bill also proposes to add a provision that the P3-million VAT threshold—increased by the 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.

The EOPT bill also proposes to allow the payment of the taxes before they are due. This impliedly allows payment of tax not necessarily simultaneously with the filing of the return.

Salceda also says that the EOPT is aligned with Department of Finance’s priority of digitalization of the taxpaying process.

To allow full digitalization of the taxpayer experience, the bill proposes to delete various provisions in the Tax Code that require taxes to be paid in the BIR offices or banks within the jurisdiction of the taxpayer’s legal residence, principal place of business or principal office, thereby giving taxpayers payment flexibility.

Bill of rights

The EOPT bill also seeks to introduce provisions on taxpayers’ rights in the Tax Code and create a taxpayers’ advocate office.

Hence, Salceda enjoined the Picpa to help him “craft a better Taxpayer Bill of Rights.”

“You would know best how to operationalize the ‘Bill of Rights’ and to identify which processes can be improved. As tax practitioners, your suggestions are most welcome and requested,” he added.

Salceda also said he will invite Picpa representatives to hearings at Congress on concerns with the 90-day VAT refund system and the imposition of VAT on indirect exporters.

He said there is already a House resolution on inviting Picpa representatives and that “the House will act on the resolution.”

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