Since Kim Jacinto-Henares' appointment as commissioner of internal revenue in 2010, she has come to be known among tax practitioners for her iron fist and zero tolerance for tax evasion. Under this environment, the outlook for taxpayers who are subjected ...
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Since Kim Jacinto-Henares' appointment as commissioner of internal revenue in 2010, she has come to be known among tax practitioners for her iron fist and zero tolerance for tax evasion. Under this environment, the outlook for taxpayers who are subjected to tax audits or investigations is bleak for the moment. "So far, she is very strict when it comes to interpretation of tax laws and rules," said an advisor.
"Although it's not possible to crackdown on all of them, it is about publically shaming these tax evaders to deter others," said another. "It is not looking good at the moment, we have a commissioner who has full backing and very narrow rulings, stretching the boundaries of what the law has said and heavily tilted in the government's favour," observes an advisor.
The effect of this approach is leading to uncertainty for the taxpayer. With such stringent attitude, taxpayers are hesitant to dispute claims brought against them or to apply for tax rulings, "Some clients are waiting to see the outcome of pending decisions and the assessments being made for others first," said a practitioner.
The tax regime has not been changed significantly in the past year, though the Bureau of Internal Revenue (BIR) has issued numerous regulations to supplement existing tax laws. Emmanuel Bonoan from Manabat Sanagustin & Co said, "Because the BIR has been taking a more active approach to tax collection – they've issued quite a number of new regulations, revisited previous rulings, and have taken a more aggressive approach against tax evasion". This essentially places a heavier compliance burden on taxpayers to mitigate their risk from attracting tax authorities.
New value added tax (VAT) rules were introduced in early 2012 to combat the smuggling of petroleum products into the customs territory from the Freeport and Economic Zones. The implication for companies from this is that a 12.5% VAT and excise tax is now payable upfront when importing petroleum products.
Once the products are exported, companies are eligible to file a claim for a tax credit certificate or refund from the Bureau of Customs and BIR, though this may lead companies to litigating their claims.
The BIR also increased the threshold for entities to register for VAT as of January 1 2012 from P1.5 million ($35,405) in annual sales or receipts to P1.9 million ($45,308).
Draft legislation known as the "sin tax" bill, relating to raising taxes on tobacco and alcohol products, is going through Parliament. It passed its second reading in the House of Representatives in June 2012 and is to proceed to its third and final reading by the end of the year. The bill if passed is anticipated to generate P33 million ($7.79 million). The revenue generated will be directed to expanding the Universal Health Care Program and efforts to decrease the number of annual deaths related to smoking and alcohol.
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