A bill which will establish an office of the taxpayer advocate and codify a bill of rights for taxpayers to encourage tax compliance and protect taxpayer welfare has been approved by the House Committee on Ways and Means chaired by Albay Rep. Joey Salceda on Monday.
According to Salceda, the committee report on House Bill 7881 or the Ease of Paying Taxes Act will also include the following features:
1. Taxpayer classification/segmentation to ease the experience of small and medium taxpayers and focus on education and taxpayer services for their segments, while focusing collection efforts on large enterprises;
2. Relaxed rules on returns filing and the payment of taxes (i.e., “venue-filing” and “pay-as-you-file”) so that taxpayers can comply with tax requirements anywhere in the country;
3. Uniform documentation for substantiating VAT transactions to facilitate electronic invoicing and close VAT loopholes; and
4. Easing compliance requirements so that tax filings for small enterprises need not be as burdensome as large enterprises.
“This is part of a bigger picture: the simplification and modernization of government processes. This is one of four pillars. The other three are ease of registering and operating a business, ease of public service delivery, and ease of government procurement. The other three pillars are in House Bill No. 8455 which I filed today,” said Salceda.
Easier taxpayer experience
Under Salceda’s bill, taxpayers, including OFWs, will be able to apply for tax identification numbers, file and pay taxes, without the need for physical appearance. Forms are also expected to be significantly reduced for small and medium taxpayers.
Meanwhile, Salceda’s bill also unifies the requirement for VAT documentation, requiring only an invoice instead of both an invoice and a receipt. This, Salceda says, will help expedite the VAT refund system in the Bureau of Internal Revenue (BIR).
According to Salceda, the proposal aims to improve ‘tax morale’ or the enthusiasm of taxpayers to meet their tax obligations. Salceda cited figures from the 2015 World Bank Enterprise Survey which shows that the Philippines exceeds the rest of East Asia and the Pacific in terms of Percent of firms visited or required to meet with tax officials (73.9 vs. 52.7); Percent of firms identifying tax rates as a major constraint (26.4 vs. 20.1) and Percent of firms identifying tax administration as a major constraint (20.8 vs. 13.6).
“One of the roots of our lack of competitiveness is low tax morale. People aren’t excited to pay taxes because the process is tedious, and open to abuse and rent-seeking,” Salceda said.
Citing an industry analysis which he conducted, Salceda estimated the economic impact of low tax morale to be as much as 0.68 to 10.02 percentage points of lost GDP growth.
The provision lauded by both the members of the majority and the members of the minority in the committee was the institution of taxpayer rights.
The taxpayer rights Salceda’s bill establishes are:
- Right to pay no more than the correct amount of tax;
- Right to a fair and impartial appeal;
- Right to timely and easy to understand information;
- Right to quality tax education and service;
- Right to the consistent and transparent application of the law;
- Right to have the cost of compliance respected whenever tax rules are prepared and enforced;
- Right to privacy and confidentiality of information, unless authorized by the taxpayer or by law;
- Right to speedy disposition of cases, assessments, audits, investigation and other similar actions;
- Right to finality of tax cases, including, but not limited to, agreement on the amount of tax due;
- Right to be protected and seek redress against malicious, excessive and wrongful assessments.
“This is the first ever tax reform dedicated exclusively to making the taxpayer’s experience easier. I anticipate very quick approval in the House, especially since even my colleagues in the minority are co-authors and supporters,” Salceda added.