www.tmap.org.ph
October 2014 Issue
TMAP MONITOR TMAP and Business Groups Demand Recall of RMC 54-2014 A group of twenty (20) business associations and professional groups including the Tax Management Association of the Philippines (TMAP) filed on October 21, 2014, a joint letter with the Department of Finance (DOF). The letter emphasized the detrimental effects on various businesses of Revenue Memorandum Circular (RMC) 54-2014 prescribing new rules for VAT refund claims. The letter was filed after a previous meeting by the representatives of the group with DOF Secretary Cesar Purisima and BIR Commissioner Kim Henares held on October 14, 2014. During the meeting, the government was adamant on applying the RMC. As a concession, the BIR committed to involve the group in reviewing the documents for the processing of VAT refund claims. In reaction to the filing of the position paper, Commissioner Henares, in a phone interview with Business World reiterated her position and emphatically said that the BIR will not withdraw RMC 54-2014.
TMAP and Business Groups during a Kapihan Session on RMC 54-2014
The joint letter highlighted the collective position of the group as follows: • RMC 54-2014 removes the fundamental right of a taxpayer to an administrative appeals process. With its interpretation that BIR inaction on VAT refund applications is “deemed denial,” said RMC effectively encourages the BIR to abdicate its administrative duty to process refund claims by compelling taxpayers to pursue judicial claims with the CTA. (Continued on page 3)
TMAP Kapihan Discusses Tax Reform Proposals Taxpayers are excited with the various tax reform proposals now pending with Congress. Most of the proposals seek to lower the tax rates or increase tax exemptions particularly of individual income taxpayers. Lawmakers have finally noticed that the tax brackets are obsolete and result to very high tax burden on the individual income taxpayers. Various meetings with Congress attended by TMAP representative discussing the proposed tax reform also disclosed the need for reliable information and data that can be presented to support the need for the tax reforms. More often than not, tax reforms are quashed at the committee level as they would result in revenue losses which the government cannot afford. (Continued on page 3)
Tax Reform Agenda in September GMM TMAP has been visible in mass media and social networks to publicize its support to Congressional initiatives to overhaul the tax system for the benefit of the taxpaying public. To update its members on the status of the Congressional initiatives, TMAP invited Congressman Romero “Miro” S. Quimbo, Chairman of the Ways and Means of the House of Representatives, as keynote speaker during the September 2014 general membership meeting.
Congressman Quimbo discussed the proposed two-part restructuring of the tax system under TRIGR. First is the proposal to adjust tax brackets based on the current consumer price index which will result in lower tax payments and increase in take-home pay. To illustrate the impact of the adjustment, a teacher who pays taxes amounting to P31,446 per year will only pay P14,871 per year under the proposed tax brackets. Second is to implement a simplified tax structure for all income earners which would remove deductions and consolidate inflation-adjusted tax brackets. Tax brackets will be condensed into four levels: (1) those earning below P174.0k shall be exempt; (2) those earning below P445.0k shall be subject to 9%; (3) those earning below P10.0m shall be subject to 17%; (4) those earning over P10.0m shall be subject to 30%. With the new brackets, 11% of the tax burden will shift to the top brackets. The simplification targets to increase compliance among selfemployed and broaden the tax base. (Continued on page 3)
Congressman Quimbo discusses tax reform initiatives
Congressman Quimbo started with an update on the proposed bill to increase the tax exemption cap for the 13th-month pay and other bonuses from the current P30,000 to P70,000. The bill was already approved by Congress on second reading and is expected to be passed into law within 2014. Q&A session
While this bill will already alleviate the plight of the working sector, there is still a need for a comprehensive tax reform program. Congressman Quimbo presented the Tax Reform for Inclusive Growth program (TRIGR) which aims to overhaul the country’s income tax system to promote fairness and equity. The current inequality in the tax system stems from the failure to adjust tax brackets to inflation and the low tax participation of the self-employed sector. Congressman Quimbo cited that only 16% of the total individual income earners pay for 85% of the total income tax collection. The 16% comprise of the salaried and wage earners who pay income taxes withheld at source. Included in this group are the middle class who shoulder 72% of all income tax payments.
Congressman Quimbo addresses questions from the audience
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TMAP and Business Groups Demand Recall of RMC 54-2014 (continued) •
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RMC 54-2014 runs contrary to the Supreme Court’s ruling in San Roque Power Corp. v. Commissioner of Internal Revenue, 690 SCRA 336 (2013), which it purports to circularize. The retroactive application of the strict “120+30” rule to all pending VAT refund applications is confiscatory since it will result to a large scale automatic denial of all pending applications. This is in violation of the non-retroactivity rule, which undermines the fairness of the tax system. Instead of streamlining the VAT refund application process, RMC 54-2014 makes compliance more burdensome to taxpayers by imposing impractical and unrealistic requirements that are very difficult to comply with, or by prescribing additional requirements not found under the law.
“The retroactive application of the strict 120+30-day rule to all pending VAT refund applications is confiscatory since it will result to a large scale automatic denial of all pending applications,” TMAP President Ms. Rina Manuel explained. The group also stressed how the implementation of the RMC is already severely impacting investor confidence in our Government and is dampening our country’s over-all national competitiveness. According to a representative of the Japanese Chamber of Commerce and Industry of the Philippines (JCCIP), “Japanese investors are very discouraged at the apparent lack of political will of the Philippine government in resolving the long-running issue of VAT refunds. This is one of the main reasons why the Philippines is getting such a small amount of investments from Japanese companies.”
Tax Reform Agenda in September GMM (continued) An increase in compliance of at least 70% and correction of 40% income underreporting is projected to increase tax revenues by 2.6% while an increase in compliance of at least 90% is projected to increase tax revenues by 14.6%. The projected timeline for passing the comprehensive tax reform bill is for the next fourteen months. Congressman Quimbo emphasized that inclusive growth can only be achieved with a fair and equitable tax system.
TMAP President Rina Manuel with Congressman Quimbo and Jose Paulo Borja of Tax Reform PH
TMAP Kapihan Discusses Tax Reform Proposals (continued) However, it became apparent that some data submitted to Congress are not reliable. For example, the projected revenue loss cited by representatives of the Department of Finance (DOF) amounting to P40B which they claim will result from increasing the tax exempt bonus from P30K to P70K needs to be verified. The DOF, in making the estimate, assumed that all compensation income taxpayers will avail of the entire P70k tax exemption. A UP professor of economics, however, estimated only a P1.7B revenue loss based on labor/workforce economic data. The estimate, however, needs to be updated based on the new data from the Bureau of Internal Revenue. To this end, TMAP has committed to both Congress and Senate Committees of Ways and Means that the group will assist in submitting position papers and studies that the lawmakers can use in drafting bills rectifying the tax rules to make them fair and equitable to the taxpayers. Pursuant to this commitment, TMAP Kapihan No. 5 and follow-up meetings were conducted. TMAP members who attended the Kapihan session tackled (1) proposed tax brackets and rates; (2) simplified tax system for selfemployed and professionals; (3) simplified tax system for marginal income earners; and (4) other Tax Code amendments. Results of the Kapihan will be formally submitted to the lawmakers. In the meantime, in its effort to garner more public inputs to the proposed reforms, TMAP has invited to the October 29 General Membership meeting various industry associations so they can react and comment to the position papers currently being drafted by TMAP.
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TMAP Holds 2nd Tax Seminar
TMAP conducted its 2nd tax seminar for 2014 entitled “Recent Tax Developments, Proposals and Controversies Through the Eyes of TMAP” on September 24, 2014 at the Hotel Intercontinental Manila. Atty. Malou Lim, TMAP Treasurer and Tax Partner at PricewaterhouseCoopers discussed recent tax related court decisions and jurisprudence. Members were apprised of recent decisions issued by the Supreme Court on the reckoning of prescriptive period for claiming refund or credit of input VAT; the recent position of the Court of Tax Appeals on issues relating to tax assessments, income and withholding taxes and value added taxes; and the issuance of Regional Trial Court of a temporary restraining order on the requirement to secure tax exemption ruling for non-stock, non-profit private educational institutions, non-governmental organizations and foundations.
Ms. Rina Manuel, TMAP President, updated the members on TMAP’s position on proposed income tax bills and its recommendations for a priority framework to help ensure passage of much needed tax reform laws through the 3Rs: (1) Rectify the tax base; (2) Reduce the tax rates; and (3) Reform the tax code. Atty. Terence Conrad Bello, TMAP Vice President – Internal and Partner at Baniqued & Baniqued, shared the recent issuances by the Bureau of Internal Revenue and TMAP’s position on certain controversial rules. The controversial issuances include Revenue Regulation 42014 which prescribes guidelines for monitoring of service fees of individuals, Revenue Memorandum Circular (RMC) 51-2014 which clarifies inurement prohibition under Section 30 of the Tax Code, and RMC 54-2014 which summarizes the rules on filing and processing of applications for VAT refund and credit.
TMAP Welcomes New Members
TMAP inducted new members during its September 2014 GMM: •
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Mr. Marvin T. Coritana, Assistant Vice President – Controller, as additional representative for existing member-firm Phinma, Inc. Atty. Garth Castaneda, Partner, Symecs Law Atty. Dionne Marie Sanchez, Partner , Symecs Law Office Mr. Joel Navarro, Rustan Supercenters Inc.
Welcome to TMAP!
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TMAP Endorses Online Petition by Tax Reform PH
TMAP Updates on Tax Reforms TMAP in the News “Inside Business,” ABS-CBN News Channel (ANC) •
Why BIR's attempt to boost collections may be short-lived" - Mornings @ ANC, September 25, 2014
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"Additional regulations are a huge burden to small taxpayers" - Inside Business, ANC, September 24, 2014
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"Tax administration reforms should be discussed with BIR" - Inside Business, ANC, September 24, 2014
TMAP endorses the online petition by Tax Reform Philippines posted at Change.org. The online petition “Lower income taxes” addressed to the House of Representatives and Senate as well the Office of the President, reads as follows:
We the signed petitioners request Congress to lower income taxes. The current income tax brackets, barely revised since 1977 has made middle and lower income Filipinos pay one of the highest income taxes in Asia. This is unfair and unjust. Thus, we strongly urge you to revise these brackets and rates to fulfill the constitutional mandate that "[t]he rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation”. The online petition was started by Jose Paulo Borja, a Marikina City resident and a team leader of a shared services division of an insurance company. To date, the page has more than 10,000 likes and the petition has more than 7,500 supporters. The 'likers' and supporters represent a broad range of Filipinos across the country and overseas. All of them are clamoring for reasonable and equitable taxes. The petition can be accessed through this link: http://www.change.org/p/the-house-of-representativesand-senate-lower-income-taxes
Special Report: 15 senators, House leaders back measures to lower income taxes (2nd of 2 parts) GMA News, October 8, 2014 Special Report: Filipinos facing reality of tax burden (1st of 2 parts) – GMA News, October 7, 2014 TMAP in Tax Reform Advocacy meetings Public Forum on Tax and Salaries sponsored by COURAGE and JUDEA (government sector employees) - September 17, 2014 Meetings with Department of Justice (DOJ) Assistant Secretary Geronimo Sy to give inputs to DOJ-DOF Technical Working Group – September 15 and 29, 2014
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About TMAP The Tax Management Association of the Philippines, Inc. is a non-stock corporation founded on October 22, 1981 established primarily to professionalize tax practice and provide a channel by which the private sector may actively participate in the drafting of tax laws, rules and regulations. At present, TMAP has over 100 members most of whom belong to, or act as consultants for, the top 1,000 corporations. The Association has been instrumental in the development and promotion of reforms in the country’s tax laws and in tax administration by actively participating in public hearings and submitting position papers in connection with the passage of revenue laws, rules and regulations. TMAP raises the level of professionalism and technical competence among its members by keeping them abreast of the latest tax rulings, regulations, issuances, decisions and policies through habitual seminars conducted by experts in government and in the private practice. The Association also conducts regular dialogues with pertinent government officials on policy issues affecting its members. TMAP has instilled and continues to instill among its members competence, professionalism and integrity in tax practice. TMAP believes that responsible tax practice is indispensable to the country’s economic growth and development.
TMAP Publications Committee Leilah Yasmin E. Alpad Eleanor L. Roque
Contact us Unit 1904, Cityland Herrera Tower Corner V. A. Rufino & Valero Streets Salcedo Village, Makati City Tel. No. 840-2325 Fax No. 346-8104 Website: www.tmap.org.ph E-mail: tax_map@yahoo.com
Happy birthday to the following TMAP members who are celebrating their respective birthdays in October and November!
OCTOBER 4 6 7 11 13 13 15 17 19 21 21 22 23 23 26
JONGKO, Catherine BERTULFO-CARISMA, Susan SANTIAGO, Willie G. TAM-YAP, Teresa R. PO, Pepito E. SORIANO, Sarah C. BAGA, Jewel M. ANGELES, Jocelyn Angelita C. GUERZON, Benjamin E. CALMA, Renato G. DELA PAZ, Cynthia L. LIM, Roque A. JAPITANA, Benito J. ROQUE, Eleanor L. SISON, Mildo Flor C.
NOVEMBER 4 YUSON-LAYUG, Laura Victoria A. 4 LERMA-FERRER, Maria Angeli O. 4 MINIOZA, Marivic F. 4 PAR, Benigno Jr. G. 4 RAMOS, Romeo S. 5 FRANCISCO, Emma C. 7 REYES, Fidela Francisca T. 10 EMPALMADO, Nelson D. 10 BLANCO-LATORRE, Rizza 12 MARTINEZ, Hector A. 12 QUINGQUING, Roger B. 15 ZARA, Clark Vincent M. 16 YNGSON, Manuel D. 17 VILLALUZ, Ma. Victoria A. 18 BANCORO, Adrian V. 24 ESPANO, Ma. Victoria C. 27 ZAMORA, Primitivo 27 BISDA, Patricia B. 28 TAN-TORRES, Joel L. 29 ZARATE, Karthyrn A. 30 YEE, Andro M.
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