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Business groups put Ease of Paying Taxes Bill as #1 in  reform wish-list to incoming admin; Proposal to boost Pres-elect Marcos’s bid to ease tax burden of MSMEs; Pro-taxpayer reform bill will help Diokno “fully digitalize” tax payment process

May 30th, 2022

House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) has echoed the call of some of the largest foreign and domestic business groups to pass the Ease of Paying Taxes Bill, saying that it will “enable incoming Secretary Benjamin 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 on fiscal reforms. So, I hope Secretary Diokno will prioritize pushing for the Ease of Paying Taxes Act. I guarantee that the House of Representatives almost certainly will approve it again next time. The incoming Speaker Romualdez was keen on that bill as Majority Leader. But the Senate often acts on fiscal reforms only when there is executive support,” Salceda said.

“Ease of Paying Taxes or EOPT will help Secretary 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.”

In a letter to the Senate dated May 18, 2022, business groups and business chambers, including the Financial Executives Institute of the Philippines, requested the passage of the following bills that have already been passed or approved by the House of Representatives and just 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, Bankers Association of the Philippines, 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 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 EOPT is crucial. And it is even more crucial given issues such as the Megaworld incident, which made evident the need for taxpayer rights protection,” Salceda said.

“Ease of Paying Taxes is ease of doing business”

Salceda also explains 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 Ease of Paying Taxes Act, which was transmitted to the Senate in September 2021, 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 depending on the 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.

EOPT also calls for the implementation of simplified tax rules and regulations for ease of compliance.

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

EOPT also proposes to add a provision that the P3-million VAT threshold, which was 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. 

“This would allow small businesses to grow without worrying about having to register for VAT if they are still unable to,” Salceda said.

EOPT 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 Diokno’s priority of digitalization of the taxpaying process.

“The EOPT has provisions that will remove the legal barriers to digitalizing every stage of the tax process. That very closely aligns with Secretary Diokno’s agenda for the BIR and BOC.”

To allow full digitalization of the taxpayer experience, EOPT 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.

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

“Clear taxpayer rights will draw the red lines that tax authorities cannot cross. That will improve confidence in the Philippines as an investment destination, and help us accelerate economic recovery,” Salceda added

Ease of Paying Taxes “good for MSMEs”

Salceda also explained 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. The removal of the need for the annual P500 taxpayer registration fee alone will be savings for the smallest of businesses.”

“This also aligns with President Bongbong Marcos’s direction to really ease the tax burden of small businesses. They will save plenty on compliance costs when we simplify restrictions.”

“EOPT is good for small businesses, as the stakeholders who supported it will explain. It would be an excellent signal from the incoming Marcos administration if it prioritizes this measure,” Salceda said.

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