Various institutions led by the National Tax Research Center (NTRC) have expressed their support for a Department of Finance (DOF) proposal on the mandatory connection of point-of-sale (POS) machines of businesses to the Bureau of Internal Revenue (BIR) and the use of electronic receipts as part of the tax administration reforms under the Comprehensive Tax Reform Program (CTRP) to improve collection efficiency.
According to NTRC Executive Director Trinidad Rodriguez, using digital technology “will facilitate real-time or near real-time collection and assessment of taxpayers data” by the BIR.
Thus, “the NTRC fully supports the proposed electronic interconnectivity of businesses’ cash registers and point-of-sale machines to the BIR system for simultaneous recording and transmittal of tax data,” said Rodriguez at a recent hearing of the Ways and Means Committee of the House of Representatives on the proposed CTRP.
Package One of the DOF’s CTRP is contained in House Bill No. 4774, which was authored by Quirino Rep. Dakila Carlo Cua, who chairs this House panel.
Finance Secretary Carlos Dominguez III has welcomed the move by this Cua-chaired House committee to “approve in principle” the first phase of the CTRP before the Lenten break of the Congress.
Dominguez said the decision of the committee to pass tax reforms as a package rather than on a piecemeal basis is a step closer for the Congress to help the Duterte administration fund its ambitious agenda to sustain the high-growth momentum, dramatically cut poverty and transform the country into a high middle-income economy by 2022.
He expressed the hope that the other members of the House of the Representatives as well as the senators would similarly see the urgency of passing this tax reform package in full “to set the economy on its irreversible path to high—and inclusive—growth under the Duterte presidency.
The House ways and means panel voted in its 8th public hearing on the CTRP to “approve in principle” tax reform as a package and not on a piecemeal basis, subject to the creation of a Technical Working Group (TWG) that would draw up a substitute bill consolidating the proposed reforms by the Department of Finance (DOF) with other tax-related proposals by the lawmakers.
Besides the NTRC, the Philippine Institute of Certified Public Accountants (PICPA) and the Management Association of the Philippines (MAP) also backed the proposed tax administration reforms using digital technology, in that same House committee hearing.
“Insofar as the POS interconnection and centralized system in the BIR is concerned, we’re fully supportive of that and also for some other specifications, because we believe that it can eventually reduce the cost of administration and even simplify the examination of the BIR,” said Alex Cabrera, who represented both MAP and PICPA in that hearing.
Kenneth Ng of the SM Group and Julie del Rosario of Jollibee Foods Corp. also informed the committee of their support for the use of e-receipts and the mandatory connection of POS systems to the BIR.
The use of digital technology to improve tax administration in the BIR and the Bureau of Customs, the fuel marking and monitoring of petroleum products, and the relaxation of bank secrecy laws for tax fraud cases, are among the legislated tax administration measures included in HB 4774.
DOF Undersecretary Karl Kendrick Chua explained at the House hearing that shifting to the digital platform will tighten tax administration and help the government collect the correct amount of revenues from private businesses.
He said the shift “will require significant investments” for both the BIR and the businesses involved and would be more effectively used for those engaged in retail businesses.
“In principle we support many of the provisions — in particular we think that tightening the tax administration by mandating the use of fuel marking, relaxing the bank secrecy for fraud criminal cases, enhancing tax administration via e-receipts interconnectivity and data sharing will all enhance administration of tax revenues,” Chua said.
“Not all industries… will find the POS machine interconnection cost effective. This I think is more effective on the retail level… this is something that we need to study. BIR has already been trying to look into these issues,” he added.
Cua’s HB 4774 aims to make the tax system simpler and more progressive through the lowering of personal income tax (PIT) rates to make these at par with those in the region, reducing the rates for donor and estate taxes, expanding the Value Added Tax (VAT) base but retaining exemptions for seniors and persons with disabilities, and adjusting the excise taxes on oil and automobiles.
HB 4774 earmarks some P48 billion for targeted transfers that would benefit the bottom 50 percent of the population and shield them from the impact of the fuel excise tax hikes and other revenue compensating measures.
Complementary reforms being considered by the Congress to HB 4774 include introducing a sugar-sweetened beverage tax, indexing the motor vehicle user’s charge to inflation, and granting an amnesty to past estate tax cases.
Secretary Dominguez earlier stressed before this Cua-chaired committee that tax reform is necessary to help fund the Duterte administration’s accelerated spending on infrastructure, which would not only fill the massive backlog left behind by the previous administrations, but would also create more jobs that are needed to help free some six million Filipinos from poverty over the next five years.
Investing heavily in infrastructure is likewise indispensable to the government’s goal of sustaining high growth and making its benefits felt by all Filipinos, he said.
Dominguez said tax reform is needed by the government so it can invest P1 trillion more each year on top of the current P1.3 trillion it invests in the economy.