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House panel okays administrative tax reform bill

A House of Representatives panel has approved a measure codifying a bill of rights for taxpayers to encourage tax compliance and protect taxpayer welfare.

The House Ways and Means Committee approved House Bill 7881, or the proposed Ease of Paying Taxes Act, which seeks to introduce administrative tax reforms by amending several sections in the National Internal Revenue Code of 1997.

The bill aims to provide an easier taxpayer experience by allowing them to apply for tax identification numbers, file and pay taxes, without the need for physical appearance.

Forms are also expected to be significantly reduced for small and medium taxpayers.

The bill also seeka to unify the requirement for value-added tax documentation, requiring only an invoice instead of both an invoice and a receipt.

Albay Rep. Joey Salceda, committee chairman, said this would help expedite the VAT refund system in the Bureau of Internal Revenue.

Salceda said the bill aims to improve “tax morale” or the enthusiasm of taxpayers to meet their tax obligations.

Citing figures from the 2015 World Bank Enterprise Survey, he said the Philippines exceeds the rest of East Asia and the Pacific in terms of percent of firms visited or required to meet with tax officials (73.9 vs. 52.7); percent of firms identifying tax rates as a major constraint (26.4 vs. 20.1) and percent of firms identifying tax administration as a major constraint (20.8 vs. 13.6).

“One of the roots of our lack of competitiveness is low tax morale. People aren’t excited to pay taxes because the process is tedious and open to abuse and rent-seeking,” he noted.

The Bicolano solon estimated the economic impact of low tax morale to be as much as 0.68 to 10.02 percentage points of lost gross domestic product growth.

Other features of the bill include taxpayer classification/segmentation to ease the experience of small and medium taxpayers; relaxed rules on returns filing and the payment of taxes through “venue-filing” and “pay-as-you-file”; uniform documentation for substantiating VAT transactions to facilitate electronic invoicing and close VAT loopholes; and easing compliance requirements so that tax filings for small enterprises need not be as burdensome as large enterprises.

“This is part of a bigger picture: the simplification and modernization of government processes. This is one of four pillars. The other three are ease of registering and operating a business, ease of public service delivery, and ease of government procurement,” he said.

The bill also seeks to establish the taxpayer rights to pay no more than the correct amount of tax; to a fair and impartial appeal; to timely and easy to understand information; to quality tax education and service; to the consistent and transparent application of the law; and to have the cost of compliance respected whenever tax rules are prepared and enforced.

Other taxpayer rights proposed include the right to privacy and confidentiality of information, unless authorized by the taxpayer or by law; right to speedy disposition of cases, assessments, audits, investigation, and other similar actions; right to finality of tax cases, including, but not limited to, agreement on the amount of tax due; and right to be protected and seek redress against malicious, excessive and wrongful assessments.

“This is the first-ever tax reform dedicated exclusively to making the taxpayer’s experience easier. I anticipate very quick approval in the House, especially since even my colleagues in the minority are co-authors and supporters,” the lawmaker said.