Audit perk for investors revoked by PH Tax Authorities

Audit perk revoked by BIR


"AN AGREEMENT that gave special tax treatment to firms registered with the Board of Investments (BoI) and Philippine Economic Zone Authority (PEZA) has been revoked by the Bureau of Internal Revenue (BIR).


"Revenue Memorandum Circular 14-2012, dated April 4, abolishes a March 2007 deal between the three agencies that exempted BoI- and PEZA-registered firms from tax audits for one and a half years.


The provisions “limiting the authority of the BIR to investigate returns” filed by enterprises within the jurisdiction of BoI and PEZA are “contrary to law,” the issuance states.


“Taxation is the sole prerogative of the BIR, and that includes tax audits. We cannot cede our authority,” BIR Commissioner Kim S. Jacinto-Henares explained in a telephone interview last week.


“I wrote to BoI and PEZA last month because this agreement is illegal. It is null and void. No one opposed my letter.”


Numerous firms have hired accountants and lawyers to unduly bring down their tax liabilities, she claimed, stressing that the BIR must have the power to audit their income tax returns (ITRs).


Ms. Henares said the tax bureau would only go as far as allowing last-priority-audits, which are rarely given.
“More importantly, these last-priority-audits are awarded only to firms that have a stellar track record in tax payment. They should not be given to firms just because they are registered with BoI or PEZA,” she said.


The new policy takes effect immediately, in time for today’s ITR filing deadline.


Moreover, the circular requires all BoI- and PEZA-registered firms to show documents certifying their entitlement to income tax holidays or preferential tax treatment. The certificates must be submitted to the BIR -- within 30 days from the filing of ITRs -- before companies can start enjoying the tax breaks.


“Tax incentives are not automatic. According to the terms and conditions of their registration, BoI and PEZA must first evaluate whether these firms are qualified for the tax perks,” Ms. Henares said.


It is common practice for enterprises to claim income tax holidays, automatically deducting incentives from liabilities without the clearance of BoI and PEZA, she said.


“When we investigate the firms, that is only when they run to BoI and PEZA,” the tax chief claimed.
Ms. Henares urged all enterprises to submit their BoI and PEZA certificates within the prescribed time frame. Documents submitted beyond the deadline will no longer be accepted and the BIR will subsequently not honor tax incentives.


“We have nothing against giving incentives. When the firms deserve these income tax holidays then we will gladly give them. We are just making sure that we implement the law,” she said.


BoI and PEZA officials were not immediately available for comment.