Press Releases

Salceda: Ease of Paying Taxes will become law in two months; commends Lumagui for BIR’s fight against tax fraud; BIR should codify regulations, digitize all processes

August 4th, 2023

House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district), in a speech to officials of the Bureau of Internal Revenue in Legazpi City today, said that he expects that the Ease of Paying Taxes (EOPT) Act will become law within the next two months. The EOPT Law was identified as a priority measure by President Marcos in his second state of the nation address.

“I expect EOPT to become law this year; in fact, maybe in the next two months,” Salceda said.

“The President wants a system that is easy for all, and he is open to new ideas on how to do it,” Salceda added.

The EOPT Law is already being tackled in the Senate floor and Salceda says “Senator Gatchalian and his colleagues will probably be done with their version next week.”

Salceda identified the key features of the reform as follows:

“First, it will allow for taxpayer classification/segmentation. There will be a small and medium taxpayer division. Small and medium taxpayers will be imposed fewer conditions.”

“Second, it will relax rules on returns filing and the payment of taxes (i.e., “venue-filing” and “pay-as-you-file”).”

“Third, we will shift to an accrual-based tax system with the invoice as the key documentation for VAT transactions, rather than a dual system with receipts for goods and invoices for services. That will result in faster VAT refunds and the full implementation of the electronic invoicing system, which I championed under TRAIN.”

“Fourth, we will ease compliance requirements. Under that, we will remove payment of annual registration fee, the requirement of audit prior to closure of a business establishment or retirement from practice of profession, and the requirement to secure an Authority to Print Receipts. We will also ease the penalty imposition on non-medium and non-large taxpayers (none for first offense, 50% for second, full rate for third).”

“Finally, we will institute a risk-based audit policy for the BIR, so that the agency is not trigger-happy with issuing Letters of Authority.”

Lumagui commended, but BIR should digitize processes, codify regulations

Salceda also commended BIR Commissioner Romeo Lumagui Jr. for the agency’s fight against tax fraud, but adds that the BIR should pursue two other internal reforms.

“An equivalent of as much as 86% of current VAT collections are not collected because of VAT fraud, use of fake receipts, or leakages in tax exemptions.” Salceda said.

“That is why I commend Commissioner Lumagui and the BIR for running after big-time tax racketeering and ghosting of tax receipts. And I am committed to making the crime of syndicated or large-scale tax receipts fraud more harshly punished. – because currently, the tax code does not discriminate between a small business padding its input VAT with receipts worth a few thousands and the P100-billion tax fraud scheme uncovered by Commissioner Lumagui and his people.”

“But, as an economist and management analyst, and recently, as a fan of this Netflix series called Qin Empire Alliance, I know that in the context of the State, virtue comes good laws properly executed. And our laws give plenty of room for corruption, discretion, fraud, arbitrage, and bribery.”

“Because the ironic fact of policy is that the more complex the laws are, the more corrupt the country becomes. The OECD has a study that suggests that the longer the constitution, the more corrupt the system. The same is true of the tax system. It is complex and corruption-prone by design.”

“First, the complete digital transformation of the tax process. All processes should be doable online.”

“Second, the complete codification of all tax regulations, as is the case in the United States, so that no regulation conflicts with another. As is often the case, when someone in the tax system wants to take it personally and run after you, they will cite an obscure regulation from the 1990s to get you. We should all be looking at the same set of documents. That is why every great civilization has undertaken a codification of its laws. You cannot build a harmonious society without doing that.”

“The Bangko Sentral ng Pilipinas has already taken that step with the Manual of Regulation for Banks. I urge the BIR to learn from the BSP in that regard,” Salceda said.

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