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Salceda thanks Velasco for prioritizing the Ease of Paying Taxes Act

July 26th, 2021

Salceda thanks Velasco for prioritizing the Ease of Paying Taxes Act; says measure will save taxpayers time, compliance costs, make doing business easier, and help close VAT gap

House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) thanked Speaker Lord Allan Jay Velasco for including the Ease of Paying Taxes Act in the priority measures of the 3rd regular session during Velasco’s session opening speech today.

Salceda, who principally authored the measure since the 17th Congress, when it was part of the Tax Administration Reform Act (TARA), said that the bill is popular with both the tax agencies and the private sector.

“First, we thank Speaker Lord Allan Jay Q. Velasco for including the Ease of Paying Taxes (EOPT) bill among the priority measures this Third Regular Session. I was able to sponsor House Bill No. 8942 in the floor last May, just before the adjournment. Now that session has resumed, we shall continue with the plenary deliberation (period of interpellation). Inclusion in the speech of the Speaker means that it will be a priority, thus, we are expecting to see it through this August 2021,” Salceda said.

“This has a very strong chance of passage because the chambers of commerce and the Bureau of Internal Revenue are both very broadly supportive of this,” Salceda added.

Salceda noted that the bill can greatly help in providing for flexible and efficient ways of administering taxes.

“The EOPT bill shall institutionalize the portability of BIR transactions and streamlining of tax compliance procedures. The increased tax compliance resulting from the tax administration efficiency introduced through this measure may bring in an estimated Php73.1 billion for the government in the first five years of implementation,” Salceda said.

“Everyone wins in streamlining tax administration. Complicated tax administration policies result in higher uncollected revenues, or tax gap, which indicates inefficiency due to outdated tax administration policies, as well as the extent of taxpayers’ non-compliance.”

Salceda also said that the bill will help close the VAT gap, or uncollected VAT revenues, by harmonizing the requirement for VAT documentation.

“We will only require invoices instead of invoices for services and receipts for goods. That makes refunds faster because there will no longer be a need to transfer documents from BOC to BIR. It will also help implement the electronic invoicing system,” Salceda said.

“In 2018, the estimated total tax gap was Php909 billion, a huge loss for the government.”

Salceda added that an effective tax administration system is also good for investments.

“On the other hand, complex tax administration results in higher tax uncertainty for investors. Our estimate is that tax uncertainty contributes up to 3.43 percentage points more to the hurdle rate for investing in the Philippines. This means that a potential business must have a profit margin of 3.43% more than usual for an investor to consider investing in the Philippines,” Salceda said.

“Tax compliance constraints on businesses were magnified during the pandemic. Since the Bureau of Internal Revenue (BIR) is still in the process of transitioning into a fully electronic tax filing and payment system, taxpayers were still required to physically file hard copies of documents and pay their tax dues to comply with set deadlines in the face of health concerns.”

The Ease of Paying Taxes bill seeks to address these concerns, among others, through the following:

  1. Simplification of the process of filing tax returns for small taxpayers to help facilitate their compliance with tax rules and regulations;
  2. Removal of the required Php500.00 annual taxpayer registration fee;
  3. Introduction of a medium taxpayer classification and a corresponding BIR special unit to capture and safeguard at least 90% of the country’s tax collections that this segment contributes, along with large taxpayers;
  4. Relaxation of rules on filing and payment by separating the acts of filing from payment, thereby giving taxpayers the flexibility to choose to pay as they file or file and pay in their respective districts;
  5. Enhanced portability of tax transactions by removing venue restrictions in the filing of returns and payment of taxes;
  6. Creation of registration facilities for non-resident taxpayers;
  7. Removal of the distinction between sales invoice and official receipts for purposes of recognizing VAT transactions and making sales invoices the document to be used by taxpayers to substantiate VAT transactions whether for sale of goods or services; and
  8. Institutionalization of a Taxpayer’s Bill of Rights to serve as the guiding principle in formulating and implementing tax policies and to increase taxpayers’ awareness of their rights to enable them to exercise and protect the same.
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