Has change started at the Bureau of Internal Revenue?

With appointment of the new Bureau of Internal Revenue (BIR) Commissioner, Atty. Cesar R. Dulay, everyone is expecting significant changes to happen in the BIR. Atty. Dulay is joining an organization cited by President Duterte as one of the most corrupt government agencies. Certainly, changing such an organization will be one gargantuan task.

Stakeholders like the local and foreign business organizations, tax practitioners, individual taxpayers, and foreign investors are eagerly observing the changes that are being introduced. It is worthwhile to examine the BIR issuances released by the new Commissioner for the first two weeks after he assumed his post last July 1. These issuances give the stakeholders and observers a clear insight of the changes what we will expect and the priorities of this new administration.

On his first day of office, the new BIR Commissioner immediately issued two revenue memoranda which were applauded by the public.

First, RMC 70-2016 suspending the conduct of BIR audit effective on July 1, 2016 and requiring the submission of inventory of pending Letters of Authority/Letter Notices as of June 30, 2016. This provided a great relief for all taxpayers by suspending all field audits and other operations of the BIR on the examination and verification of taxpayer’s books accounts and other records. The suspension provided a much need respite for taxpayers who feel harassed and stressed with all the documentary requirements imposed by the BIR during the examination process. Taxpayers have to dig through their voluminous records looking for specific invoice or contract being required by the BIR examiner. 

However, the suspension does not cover: (a) investigation of cases prescribing on or before Oct. 31, 2016; (b) taxpayer retiring from business; and (c) processing and verification of estate tax returns, donor’s tax returns, capital gains tax returns and withholding tax returns on the sale of real properties or shares of stocks together with the documentary stamp tax returns related thereto. 

We have seen some confusions as to this suspension order. Some taxpayers believed that all phases of the audit investigation were suspended. Hence, they were surprised that some examiners and BIR officials continued with the audit process and the subsequent issuance of preliminary assessment notices, final assessment notices, and final decision disputed assessment. To avoid further confusion, it is probably prudent for the BIR to make a clarificatory issuance explaining why some audits, which are not covered by the exclusions, are still continuing. 

The suspension of the examinations of taxpayers is expected to deter the unscrupulous acts of the BIR case officers. Some are hopeful that the suspension is an indication that a tax amnesty program is looming in the near future. The amnesty program will encourage taxpayers to start with a clean slate. It will also further improve the government’s tax collection by means of voluntary payment of taxes to the government.

Second, RMC 69-2016 suspending the effectivity of all revenue issuances within June 1 to 30, 2016 until further notice. Covered by this suspension are 16 Revenue Memorandum Orders (RMO), 10 Revenue Memorandum Circulars (RMC) and one Revenue Regulation (RR). There is a need to review these “midnight” issuances to streamline the processes within the BIR and avoid rules that may be used for graft and corruption. 

In addition, some rules were revoked such as the controversial RMO 24-2016 and 25-2016. These prescribe the investigation of parties in transaction involving the transfer/assignment/ sale of properties. 

With due credit to the former BIR Commissioner Henares, there were suspended issuances that are helpful and should be implemented. However, it is also within the discretion of the new administration to assess and evaluate the midnight issuances to see if they are aligned with the new thrust and policy of the new administration. 

RMC 71-2016 (issued last July 5) suspended the transfer and appointment of various BIR personnel. It recalled and revoked all Revenue Travel Assignment Orders (RTAO) issued within the period June 1 to 30, 2016. The revocation was issued to give the new administration an opportunity to make its own selection of qualified personnel that will operate the BIR offices. However, such revocation of the RTAO does not include the presidential appointees as laid down by RMC 72-16 (issued last July 8). 

The new BIR Commissioner also reminds us of the “No Gift Policy” through the RMO 40-2016 (issued last July 5). It emphasized that BIR officials and employees are public servants. As such, they must adhere to the principle that public office is a public trust and they must always aim to promote a high standard of ethics in public service. They are expected to perform their duties and responsibilities without expectation of any favor or material rewards. 

It is noticeable that some of the BIR examiners are now strictly observing the no contact policy with the taxpayers. Also, a marked number of meetings and discussions in relation to the ongoing tax investigations are now being conducted inside the premises of the Revenue District Offices and no longer in restaurants or similar establishments. 

Last week, BIR issued another remarkable issuance, RMC 74-2016, geared to promote efficiency on its service to the public. The RMC streamlined the requirements in issuing Tax Clearances required for government bidding and projects. Under the memorandum, the tax clearance shall be processed within two (2) working days from the date submission of complete documents. Further, the documentary requirements were trimmed down from nine to three, namely: (1) Duly accomplished and notarized application form with two (2) loose Documentary Stamp Tax; (2) Print-out Certification fee paid thru the BIR eFPS; and, (3) Delinquency Verification issued by the concerned Large Taxpayer Service or National/Regional Offices with a one month validity upon issuance.

This is a very welcome development as taxpayers were burdened with too many documentary requirements and uncertainty as to when to expect their tax clearance. Naturally, if the BIR processing will be more efficient, taxpayers will be able to transact their business with the BIR faster and they will be able to concentrate more on performing their core business activities. This will reduce the number of hours or days that taxpayers have to waste just following up on their applications with the BIR. 

In less than a month after assuming his post, we already witnessed the new BIR commissioner eagerly starting his mission of improving the BIR. We can see his earnest desire to remove corruption at the BIR, streamline processes and bring back taxpayer services as an important responsibility of the BIR. Taxpayers are hopeful that this new administration will finally and truly adhere to the BIR’s Vision Statement: “The Bureau of Internal Revenue is an institution of service excellence and integrity.” 

Richard R. Ibarra is a tax manager of the Tax Advisory and Compliance division

As published in BusinessWorld dated July 19, 2016