Recognizing that benefits of high taxpayer morale cannot be understated, the House Committee on Ways and Means approved Monday the proposed Ease of Paying Taxes Act which seeks to introduce administrative tax reforms to the country’s National Internal Revenue Code of 1997.
After more than two hours of virtual deliberations, the House panel, chaired by Albay Rep. Joey Salceda, approved House Bill No. 7881 that he principally authored, subject to style and amendments.
The bill seeks to amend Sections 21, 22, 51, 56, 58, 77, 81, 90, 91, 103, 106, 108, 110, 113, 114, 128, 200, 236, 237, 238, 245, and 264, and add Sections 291 and 292 of Republic Act No. 8424, otherwise known as the NIRC of 1997, as amended.
“The Ease of Paying Taxes bill complements the existing comprehensive tax reform program by introducing fundamental changes to tax administration. With major changes introduced via TRAIN and CREATE simplifying tax policy, the government now needs to modernize the way the BIR functions, vis-a-vis the taxpayers, which essentially ensures that the correct amount of taxes are paid and collected in the most convenient manner,” he said in his sponsorship speech.
During his presentation, he noted that bulk of the estimated tax gap came from Value-Added Tax (VAT) and corporate income tax (CIT), each amounting to over P350 billion in 2018.
He said the average tax gap on VAT amounted to P226 billion from 2013 to 2018. “The gap nearly doubled from 2015 to 2016, rising from P156 billion to P298 billion. As percent of potential, the tax gap ranges from 18 percent to 32 percent in said years.”
According to the House leader, the average tax gap on personal income tax (PIT) amounted to P66 billion from 2013 to 2018. “The tax gap as percent of potential tax revenues, ranged from 15 percent to 21 percent in said years.”
Salceda said his bill aims to improve tax compliance through "simplifying compliance procedures buy segmenting taxpayers and tailoring processes; enhancing the portability of tax transactions; and legislating a Taxpayer’s Bill of Rights and creating a Taxpayers’ Advocate Office."
During the hearing, the Department of Finance backed Salceda’s measure.
"I think the overall objectives of the bill, we are supportive since this will help ease doing business as well as in the collection of taxes through better compliance and efficiency in the collection on the part of BIR,” DoF Assistant Secretary Daki Napao told the panel.
He said they are “interested” on the provision of Salceda’s measure that provides the creation of Taxpayer’s Advocate Office, which shall be under the supervision and control of the DoF and independent from the Bureau of Internal Revenue (BIR). The office of the Tax Advocate seeks to ensure that the rights of the taxpayers are protected and provide assistance to taxpayers.
Napao said they also rallied behind the provision of a measure that provides that only sales invoices be used in recognizing sale or purchase of goods and services.
Salceda said such provision is expected to significantly reduce the burden of tax administration.
He said HB 7881 was filed "to enumerate what are rights of the taxpayers and what is supposed to be the institutional response of the BIR and then trying to tweak its current definitions to make its simpler, more approachable and more service oriented towards tax morale.”
"As chairman of the House Committee on Ways and Means, I am a believer in tax morale. Sa iba pong bansa, tuwang tuwa pa po sila magbayad ng buwis (In other countries, they are very happy to pay their taxes),” he said.
Citing the 2015 World Bank Enterprise Survey, he noted that the percent of firms visited or required to meet with tax officials is at 73.9 percent.
He said the current system requires person-to-person interface with tax officials, opening opportunities to arbitrariness and corruption. “Compared with the highly competitive East Asia and Pacific region, the country’s tax administration is considered a major constraint by businesses.”
Aside from Salceda’s HB 7881, the panel approved House Bill No. 7415, which provides for simplified registration, filing of returns, and payment of income and percentage taxes and seeks to provide tax relief for micro-enterprises.
Principally authored by Deputy Speaker Bro. Eddie Villanueva, HB 7415 seeks to amend Sections 74, 128, and 236 of RA No. 8424, as amended.
"These bills, these are baby steps, but I think it will eventually lead to a culture of tax morale, which is actually better in terms of GDP, in terms of collections, and in terms of distributional equity,” Salceda said.