Taxation Made Easier
By: Atty. Jomel N. Manaig
"While the bill is full of helpful amendments for taxpayers, I would like to steer your attention to more, dare I say, interesting provisions of the bill, namely: (i) the Taxpayer’s Bill of Rights; (ii) the Taxpayer’s Advocate Office; and (iii) penalties for violations of the said bill of rights."
Another hurdle has been cleared in Congress last September 26, 2022 and it involves making taxpayers’ lives easier. House Bill No. 4125 was approved by Congress and transmitted to the Senate. This bill introduces amendments to the Tax Code in the hopes of making it easier for taxpayers to comply with their obligations. But will it really? Let’s take a closer look.
One of the features of the bill is the recognition of the large and medium taxpayers. Classification of taxpayers is nothing new as the BIR already has a functioning Large Taxpayers unit. However, the bill seeks to likewise establish a Medium Taxpayers unit and such other classifications as necessary. The beauty in such classification is that simplified tax returns and processes shall be implemented for taxpayers not classified as medium or large.
Large or medium taxpayers normally have dedicated accountants to handle its tax requirements. On the other hand, smaller taxpayers may not have the luxury of employing an army of employees to see that its tax requirements are being met. The simplification of tax returns and processes for these smaller taxpayers opens the door to better tax compliance.
Another feature is the uniform documentation for the recognition of sales of goods and services for VAT purposes. Currently, in order to properly account for VAT, sale of goods must be evidenced by an invoice while sale of services must be evidenced by a receipt. With the proposed amendment, the distinction shall be removed and the invoice shall be used for either sale of goods or services.
The removal of the distinction hopefully will eliminate discrepancies in VAT reporting due to timing differences. Consistency and uniformity is a concept that taxpayers will readily embrace with open arms.
The bill also offers other features like a new threshold for the issuance of sales or commercial invoices and a reduced surcharge rate. While the bill is full of helpful amendments for taxpayers, I would like to steer your attention to more, dare I say, interesting provisions of the bill, namely: (i) the Taxpayer’s Bill of Rights; (ii) the Taxpayer’s Advocate Office; and (iii) penalties for violations of the said bill of rights.
The Taxpayer’s Bill of Rights lays down the fundamental rights that taxpayers are entitled to and what the BIR should not refuse to impart. This is all well and good as it codifies the taxpayer’s rights and gives notice to all revenue officials on what should and should not be done.
Nonetheless, it may be observed that the bill of rights are motherhood statements. By nature, motherhood statements are generalized and are devoid of particular details on how to achieve the goal. How effective will the Taxpayer’s Bill of Rights be as an assurance of impartiality and objectivity in the absence of details and specifics? How effective will it be as a form of deterrence against abusive behavior? Should this bill come into fruition and become a law, will the DOF be able to issue regulations to effectively implement this?
On the other hand, the Taxpayer’s Advocate Office is a new office within the BIR whose task is mainly to ensure protection of taxpayer’s rights and to identify systemic problems within the Bureau. Think of the Taxpayer’s Advocate Office as a guardian angel that is looking out for the interests of taxpayers. In theory, this is an incredible win for taxpayers.
However, a closer look at the proposed provision would show that the office is under and will report to the Commissioner of Internal Revenue. How effective will the Taxpayer’s Advocate Office if it is under the thumb of the head of the same government agency it is supposed to keep in check? There appears to be a misalignment, if not a direct conflict, of interest in this setup.
Lastly, a proposed provision is in the bill to impose penalties for violations of the Taxpayer’s Bill of Rights. Should the Taxpayer’s Bill of Rights be properly implemented, this provision may be vital to protect taxpayers from scrupulous and bloated assessments.
With the passage of the bill, Congress had done its part. The ball is now in the Senate’s court. Let’s see what their play will be.
The author is a junior partner of Du-Baladad and Associates Law Offices (BDB Law), a member-firm of WTS Global.
The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at This email address is being protected from spambots. You need JavaScript enabled to view it. or call 8403-2001 local 380.