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What it takes to be a centennial taxpayers awardee

(Article published in TODAY, Business Section)  

It looks like it is for the money needed to achieve this year’s revenue goal of Php 477 billion, but, I do not think so.

The Bureau of Internal Revenue’s new CTRP, an old acronym for the “Comprehensive Tax Reform Program” presently used to stand for “Centennial Taxpayers Recognition Program”, if it turns out to be almost 100% successful, is expected to yield only about Php 5 billion.  That translates to even less than ten percent of the Php 52 billion that the BIR is being asked to collect for 2004 over the actual collections in 2003. 

Commissioner Guillermo L. Parayno, Jr., instead, seems to be aiming at something more important: a change in taxpayer’s attitude.  That is why Revenue Memorandum No. 7- 2004, the launching issuance of the CTRP, is replete with safeguards to ensure that those who are given its benefits, which really are more in the form of the awardee’s psychic satisfaction rather than notable economic benefit, deserve the honor that the Bureau is bestowing.  More important than asking the taxpayers to pay, the Commissioner is asking them to pay the right amount, to do the right thing.

 










The CTRP is not an amnesty program.  It does not look back at prior years to grant pardon for past misdeeds, upon the taxpayer’s payment to the government of an amount which has an uncanny closeness to the amount that is reputed to be paid, had there been no amnesty, “under the table”.  On the contrary, the CTRP looks forward and exhorts the taxpayer to shun, in his coming tax payments, the desire to pay as less a tax as possible.  It calls on the taxpayers to increase his actual tax payments by percentages bigger than he used to, to help his country seriously address the swelling tide of budget deficit that is rolling in from the horizon, threatening his home and hearth.

The clarion call is addressed to all corporations and all individuals in business, that class of taxpayers who, under our tax system, retain a considerable amount of discretion in reporting and paying their taxes. Fixed-income earners, particularly those subject to the final withholding taxes, and the salaried employees and other compensation income recipients, are already doing the right thing, already paying taxes, and are thus not the focus of the CTRP.  The target, in other words, is he who has both the ability and opportunity to cheat on his tax payments.

What is asked by the CTRP is not too painful.  The total income tax payments of the taxpayer for the year 2003, the last tranch of which is still to be made by April 15 this year, must register an increase of at least 20% over the total tax payments he made for the year 2002.  The 20% increase is the estimated composite, I assume, of the Bureau’s guess of the deficiency due for 2002 when the taxpayer was laboring under the attitude of paying less plus the increment in the correct tax due for 2003, as determined after the taxpayer’s paradigm shift encouraged by the CTRP.  Big taxpayers, particularly companies that love to announce prior to their annual stockholder’s meetings hefty increases in revenues are expected to find that affordable. 

In acknowledgment of the taxpayer’s coming forward figuratively and literally to be recognized, the BIR offers, under Revenue Memorandum Order No. 7-2004,  a bundle of “entitlements”.  He will be honored during the Centennial Anniversary Celebration slated for 01 August 2004; he will be given a Centennial Taxpayer’s Trophy and a Centennial Honor Taxpayer’s Card that will initially entitle him to honored and special attention in any official transaction with the BIR and the Department of Finance; and he will be able to avail himself of the various E-Services, such as the convenience of the Electornic Filing and Filing Systems, the E-Submission and the E-Payee.

The Top Centennial Taxpayers, weighted or those with the highest weighted score for percentage increase and absolute peso amount increase in tax payment, drawn from all the Centennial Taxpayers shall also be accorded the protection of last priority in audit and investigation for taxable calendar year 2003 for all tax payments.  Last priority means that an audit and investigation will be conducted by the Bureau only upon careful evaluation and authorization by the Commissioner.  It is a sort of immunity from the harassment, or even from overtures presumably preparatory to harassment, from the Commissioner’s underlings in the field.

To ensure that the taxpayer does not make a mockery of the real purpose of the program by manipulating this last payment for 2003, the Bureau requires the following benchmarks.  The income taxes paid for the 4th quarter of 2003 must be more than 25% higher than those paid for the 4th quarter of the previous year, 2002.; and the first quarter income payments for this year, 2004, must be 25% more than those for the first quarter of 2003.

For business entities, implying that individuals need not comply with this one, the ratio of income taxes paid to the gross sales in 2003 must be at least the same as the ratio for 2002.  Moreover, the ratio of income tax payment to gross sales for this year’s first quarter must be at least equal to the same ratio for 2003.

For VAT taxpayers, the VAT for 2003 shall be at least equal to the greater of either 3% of gross sales or gross receipts, or the effective VAT rate for 2002.  Percentage taxpayers, on the other hand, must show at least an equal a ratio of percentage tax to gross sales for 2002 ad 2003.

To ensure that only deserving taxpayers are given the honor, a taxpayer, although complying with the above requirements, will not be considered in the selection of the Centennial Awardees if the Bureau has officially received and has verified derogatory information or denunciations against him for 2003 and if the Bureau has verified discrepancies, reported by third parties, also for 2003.

Since the thrust of the program is to encourage the taxpayer to come forward with and pay his true tax liability, the Bureau is expected to issue another order, this time to cover those who, though not meeting all the requirements for the award --- because they did not pay any tax or were in a refundable position in 2002, or because they filed their returns for 2003 late, or because  they availed themselves of the installment mode of payment, the second of  which is still due in July, 2004, or because they did not complete a full year in 2002 for their initial year of operation ,-- nevertheless will show commendable improvement in their 4th quarter and 1st quarter payments, 2004.

The question many will ask, of course, is whether the “entitlements” following from being a Centennial Awardee, is worth all the trouble of complying with the requirements, including having to amend one’s previous returns, if necessary, to reflect the correct tax and of paying additional taxes.  But that should not be the taxpayer’s overriding consideration.  Instead, the question should be, one that ought to be posed to all who are running for office in the coming elections, whether the government we will eventually get is worth the pain of paying the correct tax.

 

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