September 27th, 2022
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) believes that the Ease of Paying Taxes Act (House Bill No. 4125) will be the first tax reform measure approved in the Marcos administration, after the House of Representatives approved the measure without negative votes and abstentions (250 yes) on Monday, 26 September.
The measure will simplify tax returns and processes for smaller taxpayers for ease of compliance to tax rules and regulations. It will also introduce a medium taxpayer classification and a corresponding Bureau of Internal Revenue (BIR) special unit for better service and tax administration.
“These provisions are unanimously seen as being better for small and medium enterprises, who will pay much less in tax compliance costs and have to file much fewer paperwork.”
“We are significantly simplifying requirements for small businesses, removing “taxpayer friction” such as registration fees and the need to file taxes in specific locations, and lifting restrictions such as situs rules and the invoice-receipt difference that prevent tax administration from going fully digital.”
“That will significantly reduce the burden (time and cost) of paying taxes, making the Philippines a more attractive location to do business in. It will also encourage tax compliance, and tax morale – or the willingness of the public to pay their taxes – is often determined by how easy it is to pay taxes.”
The bill also enhances the portability of tax transactions by removing restriction of venue in the filing of returns and payment of taxes. It removes the distinction between sales invoice and official receipts and makes the former the document to be used by taxpayers to substantiate value-added tax (VAT) transactions whether for sale of goods or services. These, Salceda says, will “accelerate the digitalization process of the Bureau of Internal Revenue.”
“These venue rules prevent us from a fully digital tax payment system. That’s very bad for foreign investment, especially startups, whom we need to solve much of our socioeconomic rigidities.”
“Shifting to a pure invoice system has several benefits. First, the reckoning for taxability becomes the same. Second, we can now accelerate electronic invoicing, which is mandated under the TRAIN Law. Once that happens, we can then accelerate the grant of VAT refunds, since it will be easier to process claims and retrieve records. On the other hand, having invoices for services and receipts for goods complicates VAT administration in areas where some inputs to goods are services and vice versa. That tends to delay VAT refunds, especially when it involves imports of goods,” Salceda explained.
The measure also removes the required annual taxpayer registration fee payment worth P500.
Salceda says that the measure is also widely supported by the business community.
“The Ease of Paying Taxes Act is in fact a priority measure of the Joint Foreign Chambers as well as the Philippine Chamber of Commerce and Industry. The JFC even requested the 18th Congress to make a final push for EOPT last year, when it was atop the JFC’s wish list. It will definitely make doing business easier, and the business groups themselves enthusiastically endorse this. Both big and small businesses like this reform.”
Salceda adds that he and his Senate counterpart, Senate Ways and Means Chair Sherwin T. Gatchalian, have already discussed their way forward on the measure, and that he sees no significant hurdles to its passage in the Senate.
“We can see very quick passage in the Senate once the budget is done and Sen. Win begins his committee’s hearings on the matter. He can do so already, now that the House is done,” Salceda said.
“This is probably going to be PBBM’s first tax reform measure. And quite rightly. His SONA focused on tax administration reforms, in which, in his own words, he said he wanted ease of paying taxes.”