Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Seventeenth Congress
First Regular Session

HOUSE BILL No,_ 4882

Introduced by Representative JOEY SARTE SALCEDA

AN ACT INTRODUCING ADMINISTRATIVE TAX REFORMS, AMENDING SECTIONS 6, 21,
22, 50, 51, 52, 74, 76, 109, 112, 114, 116, 128 AND 245 OF REPUBLIC ACT NO. 8424
OTHERWISE KNOWN AS “THE NATIONAL INTERNAL REVENUE CODE OF 1997”, AS
AMENDED, AND SECTION 5 OF REPUBLIC ACT 9335 OTHERWISE KNOWN AS THE
“ATTRITION ACT OF 2005”

EXPLANATORY NOTE

1. This tax reform is about the benefits that Filipinos will reap in the
futurefrom better infrastructure and social services, and, it is about the
benefits that taxpayers here and now will experiencefroma more
responsive tax system.

2. The Tax Administration Reform Act, or TARA for short, is meant to complement.
TRAIN, to ensure that the train will run(i.e.that taxes are collected as projected) or
by improving both the efficiency of tax administration and the tax-paying
environment.This legislation may very well have been called the “ease of paying
taxes” bill,

3. TARA must exist because of TRAIN, as the former must only implement a properly
progressive and equitable tax system. "7ARAnasaTRAIN’.

4. The Philippines has struggled with huge budget deficits since 1997, where deficits
were often larger than 2% of GDP and reached a high of 5% in 2002. While the
budgeted amount of publie spending has not been overly ambitious, annual tax
collection by the BIR and BoC were routinely below their respective collection
targets. Plans to increase government spending are constantly checked by
these annual shortfalls and, mostly, by the inability to increase
taxcollections in a sustained way.



5. The Philippines fiscal health will be tested even further over the next few
years due to the government's plan to significantly boost infrastructure
spending. A successful fulfilment of the government's plan will require tax
collections to increase as a percentage of gross domestic product (GDP) is well
above the historical high of 17.5 %, achieved in 1997,

2

. Tax authorities can achieve and sustain the needed rapid increases in tax
collections only by directly confronting the existing large tax gap (the
difference between actual and potential collections) or conversely, the
narrow tax base. Various estimates of the tax gap all show that only about half of
potential taxes are in fact collected. Determined efforts to improve the effectiveness
of BIR operations have yielded positive results, with tax effort increasing from
12.8% in 2012 to approximately 14.5% in 2015. Further improvements will require
that remaining sources of revenue leakage be addressed through additional changes
in tax law as well as tax administration. It is simply too easy for taxpayers to hide
from the authorities, and - even if forced to register - to legally avoid liability. The
tax laws effectively deal with wage and salary earners, but for others provide
generous exemptions and exclusions that offer taxpayers an abundance of tax
planning opportunities that enable them to significantly lower their taxes. And in
addition, there are bank secrecy laws that severely constrain BIR’s ability to uncover
tax evasion,

7. The TARA is designed to assist the government to help close this tax gap.
The efficiency gained by improving the BIR and the environment in which it
operates will help close the tax gap between those currently paying taxes and those
that manage to escape the tax net.

Anal if the T: m

8. Closing the tax gap would increase the overall progressivity of the tax
system. A tax burden analysis shows that when the tax gap is distributed across
the entire population by levels of income, the majority of the gap comes from higher
income groups. Wage/salary earners and self-employed earn roughly the same
amount of income, in total, yet a significantly higher amount of taxes are collected
from the former. Wage and salary income is generally subject to withholding at
source, and the tax gap for such persons is comparatively small. Closing the gap will
impact higher income families more significantly than lower income families by
collecting a higher percentage of taxes (through corporate and personal income
taxes) from business and professional incomes.

9. The removal of bank secrecy rules to allow revenue authorities to combat
tax evasion, consistent with international practice, is a key step towards

2


closing the tax gap. Despite the previously noted rough equality in the incomes of
the two groups, wage earners currently account for 85% of income tax payments
while self-employed and professionals (SEP) account for only 15%. In contrast to
the withholding system applied to wage earners, SEPs file and pay under a voluntary
payment system. The tax authorities must have access to critical bank account
information to effectively monitor and go after SEPs and other high income
individuals.

10.The Optional Standard Deduction in its current form should only be
available to truly small businesses. In theory, the OSD was designed to make it
easier for relatively small and unsophisticated taxpayers to comply with the tax laws
without excessive costs of compliance. Larger businesses that employ and/or retain
fulltime accountants are already quite capable of itemizing deductions available
under the tax laws. Allowing these businesses the option to use OSD has little to no
impact on their costs of compliance, but severely undermines the equity of the tax
system by in effect granting additional deductible amounts to highly profitable firms.
Many extremely large and highly profitable firms now report in their annual reports
that they use the OSD, which means that they are paying corporate taxes at less
than the 30% statutory rate.

11.Proper implementation of an estimated tax system will benefit taxpayers
as well as the government. This will grant a simpler way for taxpayers to comply
with filing and payment requirements during the fiscal year and provide government
with a steady flow of taxes.

12.The absence of a clear definition of “related parties” for tax purposes
provides opportunities for taxpayers to engage in abusive transfer pricing
schemes where related businesses or groups of related businesses operate in and
‘out of tax preferred regimes. Traditionally, this has been an important issue for
combatting tax evasion for multinational corporations, but the proliferation of tax
incentive here has created a plethora of tax avoidance opportunities for domestic
businesses as well. Over the past 3 decades the Philippines has set up at least 12
such tax preferred zones to entice potential and additional investments. Foregone
tax revenues resulting from such schemes are estimated to be between 0.5% -
1.0% of GDP. A clearer working definition of related parties will partly help
curb such abuses by making the nature of transactions between 2 entities
more transparent. The tax laws should also clarify the power of the BIR to ‘look
through’ the substance of transactions between related parties to limit abusive
practices by taxpayers.

13.The BIR operates in an environment that limits rather than enables better
performance. An excessive focus on meeting tax collection targets - and the

3


limited resources available to BIR ~- are among major factors that constrain BIRS
practices as well as its ability to perform its functions more efficiently and
effectively. The act of broadening the tax base becomes a high risk activity; the tax
authorities avoid taking administrative risks and instead choose to use its limited
resources on a limited set of taxpayers that are generally known to be compliant.
The government must provide more resources, grant greater budget and
management flexibility, and require greater accountability. This will allow
BIR to perform its functions in accord with practices of a modern tax administration.

Core Tax Reform Objectives and Recommendations

14.The Philippines must embark on a genuine comprehen:
program at once, at the beginning of this new ad
objectives are to be achieved. A genuine ctrp that seeks to (1) increase tax
revenues to support greater budget expenditures driven by the President’s 10-point
socioeconomic agenda, (2) redistribute the tax burden to improve the fairness of the
system and make it more competitive with those of its peers and, (3) reduce the
cost of compliance which has consequences that are both broad and far reaching.
The following are essential changes that must take place in order to achieve the
above objectives.

I. To restore the fairness of the tax system (TRAIN)

1) Adjust personal income tax brackets for inflation (at the least) and
index going forward.

2) Remove bank secrecy rules to allow revenue authorities to combat
tax evasion, consistent with international practice.

3) Review VAT exemptions, and eliminate those that do not efficiently
achieve clear social and economic objectives.

4) Adjust excise tax on petroleum products and provide for periodic
adjustments for inflation going forward.

5) Institute a genuine taxpayer bill of rights.

6) Allow the use of the optional standard deduction (OSD) only by
small businesses,

I.

To make the tax system more competitive (TRAIN)

1) Lower the corporate income tax rate, closer to the ASEAN average.

2) Eliminate “nuisance” taxes - those which produce little revenue but
high compliance costs for taxpayers.

3) Raise the VAT threshold.


III.To improve voluntary compliance (TARA)

1) Provide less burdensome compliance options for smaller taxpayers.

2) Make electronic filing and payment options available to all
taxpayers and for all tax types.

3) Implement the estimated payments system for businesses in order
to minimize fluctuations in revenue collections while lowering the
cost of compliance.

4) Provide an effective and transparent tax appeals mechanism,
independent from the BIR.

5) Evaluate tax and customs administrations through the use of a set
of clearly defined, holistic and transparent performance indicators
rather than non-transparent revenue targets.

6) Advance taxpayer segmentation in the BIR and, aside from the
existing Large Taxpayers Unit, introduce units that will better serve
the needs of micro, small and medium taxpayers.

7) Implement a modern and effective human resource management
system at BIR.

IV. To improve revenue productivity (TARA)

1) Enact a clear definition of related parties as a step in controlling
abuse from the use of transfer pricing schemes and adopt thin
capitalization rules to limit earnings stripping

2) Treats all forms of tax expenditures in accordance with the budget
process.

3) Limit fiscal incentives to those where benefits are greater than
costs, and provide to only those investments that actually need
them.

18.The tax system must be responsive to the needs of different taxpayer
segments, The requirements of tax policy, tax rules and the tax environment must.
all be consistent with one another so that all taxpayers are properly served and are
not unnecessarily burdened with requirements that are not commensurate to
taxpayer capacity. Modernizing through a taxpayer segmentation approach will
enable the BIR to efficiently implement a compliance strategy that matches risks to
revenue and costs for both taxpayers and tax administration. The table below shows
how this bill intends to implement taxpayer segmentation.


Table 1 Taxpayer Segmentation

preter Micro Small Medium Large TPs taxes |
Type THFE-PAPTOTion [above PRPIO TON |
Tpaviguay {7 vor EsTax | 7 Quote fat Tox ¥ Quartcy Actual Na ]
- ¥ 01080 ¥ 01080 income tax
Ia ¥ uareeriy Est Taw 7 duarefiy Adal 7 uorieriyAcwal
Corporation Mind
‘nawiau Pore jrone T Guarteriy awa] 7 Monthly ERTax WA
|" ¥ orpresumptive | ¥ Quarterly Actual vat
corporation |™* jrone ~ cuarerly Actual |v Monthly EstTax | Monthly Est Tax
— ~orpresumptive |v quareriy acual_| ¥ Quonery Acual
Jone 7 duarery aval | rohe
individu UE ASHAT ka
| L percentage
7 Quarely Actual nope none .
corporation |* aac | .

19.A tax burden analysis is meant to show the current distribution of the tax burden
and how this affects the incomes of Filipino families. The discussion on the
progressivity of the tax system is highlighted by “mapping” the tax gap across
household incomes, essentially helping to answer the question: “which income
groups contribute to the tax gap in the Philippines’? While the findings do not tell us
anything about individual households, it instead relates to average household
incomes and taxes.

20.The analysis reveals that the distribution of the tax burden is lly
regressive at lower incomes before rising progressively toward higher
income households, representing the richest 20%. However, the tax burden is
slightly higher for the poorest decile of Filipino households, where the tax burden is
about 14.2% of HH income, than it is for the next 7 population deciles (see Figure
1). The tax burden is found to be at its relative lowest for the 7'"decile, where it is
estimated to be about 13.2% of HH income. Although the personal income tax is
conceptually paid beginning at the 7'decile, the progressive nature of the income
tax only contributes to the overall progressivity beginning with the 9! and
10'deciles where the tax burden rises to 17.4% and 28.4% of household income,
respectively. The bulk of the tax burden for the first 7 deciles comes from indirect
taxes, VAT and excises.


Figure 1
Tax Burden and Gap as a Percetage of HH Income
Fy 2014

Computed using FIES and DoF data

21.A distribution of the tax gap from both direct (income taxes) and indirect (VAT and
excise) taxes reveals that successful efforts to close these gaps could improve the
overall general progressivity of the tax system. This would occur since a large
portion of the tax gap is due to income taxes that should have been paid by higher
income households, but are not paid now. While the tax gap for the poorest 10%
of the population is only about 1/4 the size of the current tax burden for that group,
the relative magnitude of the tax gap rises progressively to 1/3 of the current tax
burden for the St'decile, and rises further to at least equal the tax burden found for
the 9" and 10'deciles. This tax burden analysis supports what many experts have
long suspected, that the majority of the tax gap comes from higher income
Filipino households. And finally, closing the tax gap will result in a more
progressive overall tax system.

Inequity of the Personal Income Tax

22.While the non-adjustment in the values of the income tax brackets (referred to as
bracket creep) has led to a comparatively regressive system where Filipinos are
taxed with a higher rates at lower levels of income, when compared to its ASEAN
counterparts, The availability of ways and schemes for self-employed and
professionals to lower income tax payments, and/or to avoid paying the personal
income tax has brought about a situation that relies (collects) heavily on the
withholding tax system on wages (see figure 4)

23.There are also a number of schemes available, that help richer individuals “escape”
paying under the PIT system by declaring income through alternative sources,
resulting in lower taxes paid for every Peso earned (e.g. dividends, interest income
and interest arbitrage, to name a few)


nao obe:4

Breakdown of income Taxes Paid by Iniduals

85%

15%

Source: Department of Finance

24. The income tax brackets must be adjusted, at the very least for inflation, in order to
make jobs in the Philippines more competitive with its ASEAN neighbors. In this
respect, harmonizing Philippine tax brackets with the ASEAN structure is more
important than adjusting the top marginal rate downward as some experts suggest.

and the Need to “Define” Related Pai

Domestic Transfer Pri

25.Transfer pricing schemes are abusive in nature whenever profits are shifted out
from a high tax regime to a low tax regime through the manipulation of a price or
prices in a transaction or transactions between related parties. The manipulation of
prices is done as a means to lower the overall tax due of a business enterprise.

26.In the meantime, abusive domestic transfer pricing schemes may likely occur when
related entities operate both inside and outside of a tax preferred zone. In the
Philippines, a separate entity is normally set-up in a tax-free or tax-preferred zone,
separately from its parent or related entity, with the latter being subject to regular
or the statutory tax rate. Abusive domestic transfer pricing behaviors likely occur
when profits are shifted into the zone by manipulating the prices of transactions
between the related parties, with the intent to lower the combined tax due of the 2
related entities. These transactions may occur in different forms. They could, for
example, arise through the supply of overpriced raw materials or through
outsourced expensive consultancy/managerial services,

27.FY 2011 data of IPA registered Philippine enterprises are suggestive of transfer
pricing abuse, as they tend to show a pattern in the cost structures of a particular
business activity that is operated by either the same or related entities in various tax
regimes (exempt, special rate and regular), but which consistently results in a lower
combined tax due. To illustrate, the Figure 6 below shows that the reqular activity
(far right) of a firm paying the statutory corporate income tax rate of 30%, has a
cost structure (total sales less COGS less Deductions) that enables it to have a tax

8


base equal to 7% of total sales (Residual). On the other hand, this same firm’s total
cost from its exempt activity is less where the tax rate is nil, resulting in a larger
notional tax base of 15% of total sales, The cost structure of the special rate activity
is also consistent with this behavior, where the relevant direct cost (COGS) is
singularly highest, resulting in a lower tax base when compared to the entity's other
2 activities.

Figure 6

a i i

Source: Computed using data from DoF

28.Furthermore, the average effective tax rates for the 3 activities are shown in table
4 below.

Table 4
Effective Tax Rates
[Exempt Special Rate | Regular
[ 4.5% 0.7% I 2.1%
Source: Computed using data from DoF

29.Finally, curbing abusive behavior from transfer pricing will require a broad set of
reforms requiring both legislative and administrative changes. However, the
enactment of a clear, working definition of related parties for purposes of
implementing tax laws, is a significant first step. While the current tax code
authorizes the commissioner of internal revenue with powers to allocate “income
and deductions” between 2 entities that share common ownership (whether directly
or indirectly), the law is substantially ambiguous to allow a more effective and
transparent implementation. Furthermore, the law must be amended to allow a
definition of related parties according to the degree of control or significance of
influence that one entity has over another’.

* Computed as the ratio of the notional tax due (tax base multiplied by the tax rate) and total sales.

2 The Philippine Accounting Standards, patterned after the International Accounting Standards define related
parties “when an investor has control over an entity (subsidiary) and has significant influence over another
entity (associate), the investor, the subsidiary and the associate are related parties to each other”

9


30.

31.1

Subsequent to this, the government must draft related transfer pricing rules that will
i) define the required transfer pricing documentation that firms submit to the Bureau
of Internal Revenue if it wishes to transact with related parties, ii) transfer pricing
audit manual, and iii) rules and procedures for implementing advanced pricing
agreements.

Below are two examples operationalizing related party definitions:

In 2008, China enacted its Enterprise Income Tax Law (EIT-Law), establishing new
bases for tax authorities to manage tax issues related to transfer pricing, thin
capitalization and general anti-avoidance rules (GAAR). Among others, the law
established contemporaneous transfer pricing documentation requirements which
governs related party transactions. Under the rules, 2 entities are treated as
related parties when one entity owns more than 25% of the other,
whether directly or indirectly.

ji. More recently in 2014, the Czech Republic’s General Financial Directorate (GFD)

introduced changes to the corporate income tax return to now mandate the
reporting of intragroup transactions. Although containing less details than what is
currently mandated in transfer pricing documentation of the EU, this report
includes details on ownership (e.g. name and registration) and type of transactions
(e.g. goods, services, payment of royalties, etc.). Finally, the requirement
introduced in the tax return is fully applicable to all transactions of
companies that enjoy an investment incentive package(s).

All told, TARA can raise revenues at 0.8% of GDP rising to 2% of GDP annually This bill
seek to improve the Philippines tax system to fortify the state in the performance of its
mandates and to rectify structural injustice.Given all these, the timely passage of this

bill

is earnestly sought.

a

a Sanre SALCEDA

10


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Seventeenth Congress
First Regular Session

4888

HOUSE BILL NO.

Introduced by Representative JOEY SARTE SALCEDA

AN ACT INTRODUCING ADMINISTRATIVE TAX REFORMS, AMENDING SECTIONS 6, 21,
22, 50, 51, 52, 74, 76, 109, 112, 114, 116, 128 AND 245 OF REPUBLIC ACT NO. 8424
OTHERWISE KNOWN AS “THE NATIONAL INTERNAL REVENUE CODE OF 1997”, AS
AMENDED, AND SECTION 5 OF REPUBLIC ACT 9335 OTHERWISE KNOWN AS THE
“ATTRITION ACT OF 2005”

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Title. - This Act shall be known as the “Tax Administration Reform
Act” or its acronym TARA.

SECTION 2. Declaration of Policy. - It is hereby declared the policy of the State:

1. To provide a healthy environment for the tax paying public that protects and
safeguards taxpayer rights and welfare, that assures the fair treatment of all
taxpayers, that provides a cost-effective venue for taxpayers to challenge tax
assessments before an objective panel which would ultimately pave the way
towards understanding the behavior of taxpayers, and, is uninhibited by laws
and rules that only serve to diminish its ability to detect and prosecute non-
compliance.

2. To modernize tax administration and improve its efficiency and effectiveness
by providing mechanisms that encourage proper compliance at the least cost
and resources possible. This shall include, among others, the implementation
of technology based filing and payment systems which would lessen the burden
‘on the part of taxpayers in complying with their obligation.

3. To enact policies and procedures which are appropriate to different types of
taxpayers. The State recognizes that the needs, capabilities and requirements
for proper compliance are different across taxpayer sizes, from micro to small,
medium to large taxpayers. These differences shall be taken into consideration
in developing rules and regulations, which includes, among others, forms of
tax returns, tax declarations and frequency of filing and payment.


4. To encourage officials and employees of the Bureau of Internal Revenue and
Bureau of Customs to exceed their revenue targets and to perform their
functions in the most efficient and effective manner possible.

5. To monitor the Bureau of Internal Revenue and the Bureau of Customs on the
basis of a holistic set of performance indicators that reflect revenue collections,
tax administration functions, and adherence to current pressing needs of the
Bureaus, such as, but not limited to, encouraging tax compliance and the
achievement of one hundred percent (100%) electronic filing.

SECTION 3. Taxpayer's Bill of Rights- In addition to the rights and remedies of the
taxpayer provided for in the National Internal Revenue Code of 1997, as amended, the
taxpayer shall have the following rights:

. Right to pay no more than the correct amount of tax

. Right to a fair and impartial appeal

Right to timely information

|. Right to quality tax education and service

. Right to the consistent and transparent application of the law

. Right to have the cost of compliance respected whenever tax rules are

prepared and enforced

7. Right to privacy and confidentiality of information, unless authorized by the
taxpayer or by law

8. Right to speedy disposition of cases, assessments, audits, investigation and
other similar actions.

9. Right to finality of tax cases, including, but not limited to, agreement on the

amount of tax due

Right to be protected and seek redress against malicious, excessive and

wrongful assessments

Queene

cr

S

SECTION 4. Classification of Taxpayers “Taxpayers shall hereby be classified as
Micro, Small, Medium and Large, as such, the provisions of Section 21 and Section 245
of the National Internal Revenue Code of 1997, as amended, are hereby amended to
read as follows:

“SECTION 21. Sources of Revenue AND CLASSIFICATION
OF TAXPAYERS. —

“A. The following taxes, fees and charges are deemed
to be national internal revenue taxes:

"(a) Income tax;

"(b) Estate and donor's taxes;
"(c) Value-added tax;

"(d) Other percentage taxes;


"(e) Excise taxes;

"(f) Documentary stamp taxes; and

"(g) Such other taxes as are or hereafter may be
imposed and collected by the Bureau of Internal
Revenue.

“(B) CLASSIFICATION OF TAXPAYERS — TAXPAYERS
SHALL BE CLASSIFIED INTO MICRO, SMALL, MEDIUM AND
LARGE. THE SECRETARY OF FINANCE, UPON
RECOMMENDATION OF THE COMMISSIONER, SHALL
ESTABLISH A REASONABLE CRITERIA FOR CLASSIFYING
TAXPAYERS INTO LARGE, MEDIUM, SMALL AND MICRO
TAKING INTO CONSIDERATION GROSS SALES AND/OR
RECEIPTS OF THE TAXPAYER, THE AMOUNT OF TAX PAID,
AS WELL AS OTHER RELEVANT ECONOMIC FACTORS.

“PROVIDED, THAT MICRO AND SMALL TAXPAYERS
SHALL BE TAXPAYERS WHOSE GROSS SALES AND/OR
RECEIPTS DO NOT EXCEED THE AMOUNT PRESCRIBED
UNDER SECTION 109 (W).

“PROVIDED, FURTHER, THAT A MORE SIMPLIFIED
TAX RETURN SHALL BE USED FOR MICRO TAXPAYERS
PRINTED WITH A TRANSLATION IN THE NATIONAL
LANGUAGE. PROVIDED, FINALLY, THAT FOR MICRO
TAXPAYERS ALL FEES, CHARGES OR OTHER PENALTIES
IMPOSED UNDER THIS CODE SHALL NOT BE IMPOSED FOR
THE FIRST VIOLATION. FOR THE SECOND (2"°) VIOLATION
OF THE SAME OFFENSE, A REDUCED RATE EQUIVALENT TO.
FIFTY PERCENT (50%) SHALL BE IMPOSED. FOR THE THIRD
(3°) VIOLATION OF THE SAME OFFENSE, THE FULL RATE
SHALL BE IMPOSED.”

"SECTION 245. Specific Provisions to be Contained in
Rules and Regulations. — The rules and regulations of the Bureau
of Internal Revenue shall, among other things, contain provisions
specifying, prescribing or defining:

XXX
"(Q) The manner in which internal revenue taxes, such as

income tax, including withholding tax, estate and donor's taxes,
value-added tax, other percentage taxes, excise taxes and


documentary stamp taxes shall be paid through the collection
Officers of the Bureau of Internal Revenue or through duly
authorized agent banks which are hereby deputized to receive
payments of such taxes and the returns, papers and statements
that may be filed by the taxpayers in connection with the
payment of the tax: Provided, however, that notwithstanding the
other provisions of this Code prescribing the place of filing of
returns and payment of taxes, the Commissioner may, by rules
and regulations, require that the tax returns, papers and
statements and taxes of MICRO, SMALL, MEDIUM AND large
taxpayers be filed and paid, respectively, through collection
officers or through duly authorized agent banks. THE
TAXPAYER'S RIGHT TO HAVE THE COST OF COMPLIANCE
RESPECTED WHENEVER TAX RULES ARE PREPARED AND
ENFORCED SHALL BE CONSIDERED WHENEVER THE
COMMISSIONER PRESCRIBE NEW RULES ON FILING OF
RETURNS AND PAYMENT OF TAXES. [Provided;-further—Fhat-the
ise-this-p: within-sie(6 f
the-approval_ of Republic Act-Ne,-7646-or-the-completion-of-tts
pre putertzation—program,—which
earlier:] Provided, finally, That separate venues for the Luzon,
Visayas and Mindanao areas may be designated for the filing of
tax returns and payment of taxes by said large AND MEDIUM
taxpayers.

["Forpurp fF this-Seetion—targe-taxpayer
taxpayer-whe-satisfies-any-of-the-following-eriteria:

"C4)-Value-Added-Fax (VAT) —Business-establishmentwith
VAT-paid_or payable-of at least hund
400,000)-for-any-quarter-of the preceding-taxabl

"4Q)-BxciseFax—Bi ealblishment-with-exelsete

illion-peses-(P4,000,000)-for-the

preceding-taxable-year;

143: porate Fax —Bus! stablishment-with

a tax-paid-or-payable-of-at least Hion-p
(P4;000,000)-for-the-preceding taxable-year;-and

“C)— Withholding Tax — Bi tablishment—with,
withhelding-tax payment ite Kons MH

peses-{P+,000,000} for-the-preceding-taxable-year,


Provided —how that—the—Secret: fF

i ¥ maa
dation-of th may modify or-add-to the
pove citer for-determining-o-large taxpayer aft idering
h_factors—as_inflation, vo ie
nployment-fevels,-ane-sinh fasion

“The penalties prescribed under Section 248 of this Code shall
be imposed on any violation of the rules and regulations issued by
the Secretary of Finance, upon recommendation of the
Commissioner, prescribing the place of filing of returns and
payments of taxes by large and medium taxpayers.”

SECTION 5. Estimated Tax System. - The estimated tax system for income tax
payments shall be implemented. For this purpose, the following provisions of the National
Internal Revenue Code of 1997, as amended, are hereby amended as follows:

A. Two additional definition is added to Section 22, as such, it is hereby amended
to read as follows:

“SECTION 22. Definitions. — When used in this Title:
XXX

(II)THE TERM “FILING OF RETURNS” SHALL REFER TO THE ACT
OF ACCOMPLISHING THE PRESCRIBED TAX RETURN AND
SUBMITTING THE RETURN TO THE BUREAU OF INTERNAL
REVENUE AS REQUIRED UNDER THIS CODE OR AS PRESCRIBED
UNDER EXISTING RULES AND REGULATIONS.

(33) THE TERM “PAYMENT OF TAXES" OR “REMITTANCE OF TAX"
SHALL REFER TO THE ACT OF DELIVERING THE AMOUNT OF
TAX DUE OR WITHHELD TO THE BUREAU OF INTERNAL
REVENUE AS REQUIRED UNDER THIS CODE OR AS PRESCRIBED
UNDER EXISTING RULES AND REGULATIONS.”

B. Section 51(C) (1) is hereby amended to read as follows:

"SECTION 51. Individual Return. —

“(A) Requirements. -

“(1) Except as provided in paragraph (2) of this Subsection, the
following individuals are required to file [an] A QUARTERLY


ESTIMATED INCOME TAX RETURN AND AN ACCURATE FINAL
ADJUSTMENT AND ANNUAL income tax return:

(a) Every Filipino citizen residing in the Philippines;

(b) Every Filipino citizen residing outside the Philippines, on his
income from sources within the Philippines;

(c) Every alien residing in the Philippines, on income derived from
sources within the Philippines; and

(d) Every nonresident alien engaged in trade or business or in the
exercise of profession in the Philippines.

“QUARTERLY ESTIMATED RETURNS SHALL NOT BE
CONSIDERED AS ACCURATE FINAL RETURNS.”

2K
"(C) When to File, —

"(1) The FINAL ADJUSTMENT AND ANNUAL return of any
individual specified above shall be filed on or before the fifteenth
(15th) day of April of each year covering income for the preceding
taxable year. THE QUARTERLY ESTIMATED RETURNS SHALL BE
FILED ON OR BEFORE THE FIFTEENTH (15™) DAY OF MAY, THE
FIFTEENTH (15™) OF AUGUST AND THE FIFTEENTH (15") OF
NOVEMBER OF EACH YEAR COVERING INCOME FOR THE FIRST,
SECOND AND THIRD QUARTER OF THE CURRENT TAXABLE
YEAR, RESPECTIVELY.”

. Section 52 (A) is hereby amended to read as follows:
“SEC. 52. Corporation Returns. -

“(A) Requirements. - Every corporation subject to the tax
herein imposed, except foreign corporations not engaged in trade
or business in the Philippines, shall render, in duplicate, a true
and accurate quarterly income tax return and final or adjustment
return in accordance with the provisions of Chapter XII of this
Title. The return shall be filed by the president, vice-president or
other principal officer, and shall be sworn to by such officer and
by the treasurer or assistant treasurer. PROVIDED, THAT,
CORPORATIONS ALLOWED TO FILE AN ESTIMATED INCOME
TAX UNDER THIS CODE, IN LIEU OF THE QUARTERLY INCOME
TAX RETURN MENTIONED-ABOVE, MAY FILE AN ESTIMATED


INCOME TAX RETURN, QUARTERLY ESTIMATED RETURNS
SHALL NOT BE CONSIDERED AS ACCURATE FINAL RETURNS.”

D, Section 74 is hereby amended to read as follows:

“SECTION 74. Declaration of Income Tax for
Individuals. —

“(A)In General. — Except as otherwise provided in this Section,
every individual subject to income tax under Sections 24 and 25(A)
of this Title, who is receiving self-employment income, whether it
constitutes the sole source of his income or in combination with
salaries, wages and other fixed or determinable income, shall
make and file a declaration of his estimated income for the current
taxable year on or before April 15 of the same taxable year.
HOWEVER, IF THE ESTIMATED INCOME IS THE SAME AMOUNT
AS HIS DECLARED INCOME AS CONTAINED IN HIS FINAL
ADJUSTMENT AND ANNUAL RETURN, HE MAY USE THE SAME AS
HIS DECLARATION. In general, self-employment income consists
of the earnings derived by the individual from the practice of
profession or conduct of trade or business carried on by him as a
sole proprietor or by a partnership of which he is a member.
Nonresident Filipino citizens, with respect to income from without
the Philippines, and nonresident aliens not engaged in trade or
business in the Philippines, are not required to render a
declaration of estimated income tax. The declaration shall contain
such pertinent information as the Secretary of Finance, upon
recommendation of the Commissioner, may, by rules and
regulations prescribe. An individual may make amendments of a
declaration filed during the taxable year under the rules and
regulations prescribed by the Secretary of Finance, upon
recommendation of the Commissioner.

Fh -of-estimated-+ defined-in-Subsection-t
with-respeet-to-which-a-declaration is-required-under Subset
hal-be-paid-in-four-(4) installments.-The-first installment shall
be-paid-at-the-time-ef_the-dectarath athe e-and-third
shall-be-paid-on-August-15-and-Nevember-15-of-th year,



m

(B[¢E}] Definition of Estimated INCOME Tax. — In the case of an
individual, the term ‘estimated INCOME tax' means the amount
which the individual declared as income tax in his final adjusted
and annual income tax return for the preceding taxable year minus
the sum of the credits allowed under this Title against the said tax.
[if-duringth t-taxabk -—the—-taxpi bly
exxpeets-te-pay-a-bigg 4ax;-he-shall_file-a-deelarat
duting interval-efinstallmentpayment—dates:] IF THE
TAXPAYER REASONABLY EXPECTS TO PAY A LOWER OR HIGHER
INCOME TAX FOR THE CURRENT TAXABLE YEAR OR FOR ANY
PARTICULAR QUARTER THEREIN, HE SHALL FILE A
DECLARATION STATING THE ESTIMATED AMOUNT OF INCOME
TAX TO BE PAID. PROVIDED, THAT, ONLY INDIVIDUALS WITH
AN ANNUAL GROSS SALES AND/OR RECEIPTS FOR THE
PRECEDING TAXABLE YEAR WHICH DO NOT EXCEED THE
AMOUNT PRESCRIBED UNDER SECTION 109 (W) IS ALLOWED TO
PAY AN ESTIMATED TAX.

(C) FILING AND PAYMENT OF ESTIMATED INCOME TAX — THE
AMOUNT OF ESTIMATED INCOME TAX AS DEFINED IN
SUBSECTION (B) HEREOF SHALL BE PAID IN FOUR (4)
INSTALLMENTS. THE INSTALLMENTS SHALL BE PAID AT THE
TIME OF FILING AS PROVIDED UNDER SECTION 51(C)(1) OF
THIS CODE. QUARTERLY PAYMENTS EQUIVALENT TO AT LEAST
NINETY PERCENT (90%) OF ONE FOURTH (1/4) OF THE
DECLARED ESTIMATED INCOME TAX FOR THE TAXABLE YEAR
SHALL BE CONSIDERED AS PRIMA FACIE EVIDENCE OF CORRECT
PAYMENT. NOTWITHSTANDING, THE APPROPRIATE FEES,
CHARGES OR OTHER PENALTIES PROVIDED UNDER THIS CODE
SHALL BE IMPOSED FOR ANY NON-DECLARATION OF INCOME
REALIZED FOR THE QUARTER AS DETERMINED UPON
EXAMINATION AFTER THE FILING OF THE FINAL ADJUSTMENT
AND ANNUAL RETURN.”

Section 76 is hereby amended to read as follows:

"SECTION 76. Fiscal Adjustment Return AND
ESTIMATED INCOME TAX RETURNS. —

“A. Every corporation liable to tax under Section 27 shall file a
final adjustment return covering the total taxable income for the
preceding calendar or fiscal year. If the sum of the quarterly tax
payments made during the said taxable year is not equal to the


total tax due on the entire taxable income of that year, the
corporation shall either:

"(1) Pay the balance of tax still due; or
(2) Carry-over the excess credit; or
"(3) Be credited or refunded with the excess amount paid,

as the case may be.

"In case the corporation is entitled to a tax credit or refund of the
excess estimated quarterly income taxes paid, the excess amount
shown on its final adjustment return may be carried over and
credited against the estimated quarterly income tax liabilities for
the taxable quarters of the succeeding taxable years. Once the
option to carry-over and apply the excess quarterly income tax
against income tax due for the taxable quarters of the succeeding
taxable years has been made, such option shall be considered
irrevocable for that taxable period and no application for cash
refund or issuance of a tax credit certificate shall be allowed
therefor.

“B. DEFINITION OF ESTIMATED INCOME TAX. — THE
TERM ‘ESTIMATED INCOME TAX' MEANS THE AMOUNT WHICH
A CORPORATION DECLARED AS INCOME TAX IN ITS FINAL
ADJUSTMENT RETURN FOR THE PRECEDING TAXABLE YEAR
MINUS THE SUM OF THE CREDITS ALLOWED UNDER THIS TITLE
AGAINST THE SAID TAX. IF THE TAXPAYER REASONABLY
EXPECTS TO PAY A LOWER OR HIGHER INCOME TAX FOR THE
CURRENT TAXABLE YEAR OR FOR ANY PARTICULAR QUARTER
THEREIN, HE SHALL FILE A DECLARATION STATING THE
ESTIMATED AMOUNT OF INCOME TAX TO BE PAID. PROVIDED,
THAT, ONLY THOSE CORPORATIONS WHOSE ANNUAL GROSS
SALES AND/OR RECEIPTS FOR THE PRECEDING TAXABLE YEAR
WHICH DO NOT EXCEED THE AMOUNT PRESCRIBED UNDER
SECTION 109 (W) IS ALLOWED TO PAY AN ESTIMATED TAX.”

C. FILING AND PAYMENT OF ESTIMATED INCOME TAX
— THE AMOUNT OF ESTIMATED INCOME TAX AS DEFINED IN
SUBSECTION (B) HEREOF SHALL BE PAID IN FOUR (4)
INSTALLMENTS, THE INSTALLMENTS SHALL BE PAID AT THE
TIME OF FILING AS PROVIDED UNDER THIS CODE, QUARTERLY
PAYMENTS EQUIVALENT TO AT LEAST NINETY PERCENT (90%)
OF ONE FOURTH (1/4) OF THE DECLARED ESTIMATED INCOME
TAX FOR THE TAXABLE YEAR SHALL BE CONSIDERED AS PRIMA
FACIE EVIDENCE OF CORRECT PAYMENT, NOTWITHSTANDING,


THE APPROPRIATE FEES, CHARGES OR OTHER PENALTIES
PROVIDED UNDER THIS CODE SHALL BE IMPOSED FOR ANY
NON-DECLARATION OF INCOME REALIZED FOR THE ANY
QUARTER AS DETERMINED UPON EXAMINATION AFTER THE
FILING OF THE FINAL ADJUSTMENT AND ANNUAL RETURN.”

SECTION 6. Allocation of Income and Deductions — the provision of Section 50 of
the National Internal Revenue Code of 1997, as amended, is hereby amended to read as
follows:

"SECTION 50. Allocation of Income and Deductions. — In the
case of two or more organizations, trades or businesses (whether or not
incorporated and whether or not organized in the Philippines) owned or
controlled OR INFLUENCED directly or indirectly by the same interests, the
Commissioner is authorized to distribute, apportion or allocate gross income
or deductions between or among such organization, trade or business, if he
determines that such distribution, apportionment or allocation is necessary
in order to prevent evasion of taxes or clearly to reflect the income of any
such organization, trade or business. IN DETERMINING THE
RELATIONSHIP BETWEEN THE ORGANIZATIONS, TRADES OR BUSINESS,
THE COMMISSIONER SHOULD LOOK INTO, AMONG OTHERS, THE
OWNERSHIP OF THE ORGANIZATION, TRADE OR BUSINESS. PROVIDED,
THAT, IF OWNERSHIP OF AN ORGANIZATION, TRADE OR BUSINESS IS AT
LEAST TWENTY PERCENT (20%) IN ANOTHER ORGANIZATION, TRADE OR
BUSINESS, BOTH ORGANIZATIONS, TRADES OR BUSINESS SHALL BE
REQUIRED TO SUBMIT THE NECESSARY REPORTS AS REQUIRED BY THE
COMMISSIONER, SUCH AS, BUT NOT LIMITED TO, TRANSFER PRICING
DOCUMENTATION. THE SECRETARY OF FINANCE, UPON
RECOMMENDATION OF THE COMMISSIONER, SHALL ISSUE THE
APPROPRIATE GUIDELINES FOR THE IMPLEMENTATION OF THIS
PROVISION.”

SECTION 7. Value Added Tax and Percentage Tax -

A. The required amount of gross sales and/or receipts in order to be exempt from
Value Added Tax is hereby increased to Five million pesos (P5,000,000.00). As such,
section 109 (W) of the National Internal Revenue Code, as amended, is hereby amended
to read as follows:

“SECTION 109. Exempt Transactions. — The following
shall be exempt from the value-added tax:

XxX


“109 (w) Sale or lease of goods or properties or the
performance of services other than the transactions mentioned in
the preceding paragraphs, the gross annual sales and/or receipts do
not exceed the amount of FIVE MILLION [One-mition-five-hundred
thousand] pesos (P5,000,000.00 [P4;500,000]): Provided, That
every three (3) years thereafter, the amount herein stated shall be
adjusted to its present value using the Consumer Price Index, as
published by the Philippine Statistics Agency (PSA);”

B. Issuance of Tax Credit Certificates for excess input VAT shall be removed and
only cash refunds will be allowed, As such, Section 112 of the National Internal Revenue
Code of 1997, as amended, is hereby amended to read as follows:

"SECTION 112. Refunds [erTax—Gredits] of Input
Tax. —

"(A)  Zero-rated or Effectively Zero-rated Sales. — Any VAT-
registered person, whose sales are zero-rated or effectively zero-
rated may, within two (2) years after the close of the taxable quarter
when the sales were made, apply for [the-issuance-of atax credit
certificate-or] refund of creditable input tax due or paid attributable
to such sales, except transitional input tax, to the extent that such
input tax has not been applied against output tax: Provided,
however, That in the case of zero-rated sales under Section
106(A)(2)(a)(1),(2) and (B) and Section 108 (B)(1) and (2), the
acceptable foreign currency exchange proceeds thereof had been
duly accounted for in accordance with the rules and regulations of
the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where
the taxpayer is engaged in zero-rated or effectively zero-rated sale
and also in taxable or exempt sale of goods or properties or services,
and the amount of creditable input tax due or paid cannot be directly
and entirely attributed to any one of the transactions, it shall be
allocated proportionately on the basis of the volume of sales.

"(B) Capital Goods. — A VAT-registered person may apply
for [the-Issuanee-of-a-tax-eredit-certifieate-or] refund of input taxes
paid on capital goods imported or locally purchased, to the extent
that such input taxes have not been applied against output taxes.
The application may be made only within two (2) years after the
close of the taxable quarter when the importation or purchase was
made.

"(C) Cancellation of VAT Registration. — A person whose
registration has been cancelled due to retirement from or cessation


of business, or due to changes in or cessation of status under Section
106(C) of this Code may, within two (2) years from the date of
cancellation, apply for [the~-issuanee—ef-a—taxeredit-certifieate]
REFUND for any unused input tax. [which-may-be-sed-in-payment
of-his-otherinternatrevenue-taxes:]

"(D) Period within which Refund [er-Fax-Credit] of Input
Taxes shall be Made. — In proper cases, the Commissioner shall
grant a refund [orissue-the-tax-credit certificate] for creditable input
taxes within one hundred twenty (120) days from the date of
submission of complete documents in support of the application filed
in accordance with Subsections (A) and (B) hereof.

"In case of full or partial denial of the claim for tax refund [er
tax-credit,] or the failure on the part of the Commissioner to act on
the application within the period prescribed above, the taxpayer
affected may, within thirty (30) days from the receipt of the decision
denying the claim or after the expiration of the one hundred twenty
day-period, appeal the decision or the unacted claim with the Court
of Tax Appeals.

"(E) Manner of Giving Refund. — Refunds shall be made
upon warrants drawn by the Commissioner or by his duly authorized
representative without the necessity of being countersigned by the
Chairman, Commission on Audit, the provisions of the Administrative
Code of 1987 to the contrary notwithstanding: Provided, That
refunds under this paragraph shall be subject to post audit by the
Commission on Audit."

C. The requirement of monthly payment of Value Added Tax for medium taxpayers
whose gross sales or receipts is below Ten million pesos (P10,000,000.00) is hereby
removed. As such, Section 114 (A) of the National Internal Revenue Code of 1997, as
amended, is hereby amended to read as follows:

"SECTION 114. Return and Payment of Value-added
Tax. —

"(A) In General. — Every person liable to pay the value-added
tax imposed under this Title shall file a quarterly return of the amount
of his gross sales or receipts within twenty-five (25) days following
the close of each taxable quarter prescribed for each taxpayer.
[Provided,_hewever,—TFhat_VAT-registered_persons—shalt-_pay—the
value-added-tax-on-a-monthly-basis-] PROVIDED, THAT, TAXPAYERS
CLASSIFIED AS LARGE AND MEDIUM SHALL FILE A MONTHLY


ESTIMATED RETURN AND A QUARTERLY RETURN BASED ON THE
ACTUAL AMOUNT OF HIS GROSS SALES OR RECEIPTS WITHIN
TWENTY-FIVE (25) DAYS FOLLOWING THE CLOSE OF EACH
MONTH, PROVIDED, FURTHER, THAT, TAXPAYERS CLASSIFIED AS
MEDIUM TAXPAYERS WHOSE GROSS SALES OR RECEIPTS IS.
BELOW TEN MILLION PESOS (P10,000,000.00) SHALL NOT BE
REQUIRED TO FILE A MONTHLY ESTIMATED RETURN AND SHALL
BE ALLOWED TO USE A PRESUMPTIVE INPUT VALUE ADDED TAX
EQUIVALENT TO SIXTY PERCENT (60%) OF THE TOTAL VAT-ABLE
SALES FOR TAXPAYERS ENGAGED IN THE SALE AND/OR LEASE OF
GOODS AND THIRTY ONE POINT FIVE PERCENT (31.5%) FOR
TAXPAYERS ENGAGED IN THE PERFORMANCE OF SERVICES. THE
SECRETARY OF FINANCE MAY ADJUST THIS RATE, UPON THE
RECOMMENDATION OF THE COMMISSIONER.

“PROVIDED, FINALLY, REGARDLESS OF CLASSIFICATION OF
A TAXPAYER, PAYMENT OF THE VALUE-ADDED TAX SHALL BE DONE
AT THE TIME OF FILING AS SPECIFIED ABOVE.”

"Any person, whose registration has been cancelled in
accordance with Section 236, shall file a return the tax due thereon
within. twenty-five (25) days from the date of cancellation of
registration: Provided, That only one consolidated return shall be
filed by the taxpayer for his principal place of business or head office
and all branches. Provided, that the taxpayer shall pay the VAT due
at the time of filing.”

D. The requirement of paying percentage tax for individuals and corporation
classified as micro taxpayers shall likewise be removed. Accordingly, the provision of
Section 116 of the National Internal Revenue Code, as amended, is amended to read as
follows:

"SECTION 116. [Tax on Persons Exempt from
Value-added Tax (VAT).] EXEMPTION — Any person whose
sales or receipts are exempt under Section 109(z) of this Code from
the payment of value-added tax and who is not a VAT-registered
person shall pay a tax equivalent to three percent (3%) of his gross
quarterly sales or receipts: Provided, That cooperatives shall be
exempt from the three percent (3%) gross receipts tax herein
imposed. PROVIDED, FURTHER, THAT TAXPAYERS CLASSIFIED AS
MICRO SHALL BE EXEMPT FROM PAYMENT OF PERCENTAGE TAX.


E. The filing and payment of percentage tax for gross sales, receipts or earnings
is hereby fixed on a quarterly basis, hence, the Section 128 (A) (3) of the National Internal
Revenue Code of 1997, as amended, is hereby amended to read as follows:

“SECTION 128. Returns and Payment of Percentage
Taxes. —

“A. Returns of Gross Sales, Receipts or Earnings and Payment
of Tax. —

“(1) Persons Liable to Pay Percentage Taxes. - Every
person subject to the percentage taxes imposed under this
Title shall file a quarterly return of the amount of his gross
sales, receipts or earnings and pay the tax due thereon
within twenty-five (25) days after the end of each taxable
quarter: Provided, That in the case of a person whose VAT
registration is cancelled and who becomes liable to the tax
imposed in Section 116 of this Code, the tax shall accrue
from the date of cancellation and shall be paid in
accordance with the provisions of this Section.

(2) Person Retiring from Business. - Any person retiring
from a business subject to percentage tax shall notify the
nearest internal revenue officer, file his return and pay the
tax due thereon within twenty (20) days after closing his
business.

“(3) Exceptions. - EXCEPT FOR THE PERIOD FOR FILING
AND PAYMENT PRESCRIBED IN PARAGRAPH (A)(1)
HEREOF, [T]the Commissioner may, by rules and
regulations, prescribe:

(a) The time for filing the return at intervals other
than the time prescribed in the preceding paragraphs
for a particular class or classes of taxpayers after
considering such factors as volume of sales, financial
condition, adequate measures of security, and such
other relevant information required to be submitted
under the pertinent provisions of this Code; and

(b) The manner and time of payment of percentage
taxes other than as hereinabove prescribed, including
a scheme of tax prepayment.

SECTION 8. Tax Appeals Board —


.. Composition, Organization and Functions of the Tax Appeals Board -

. The Tax Appeals Board (Board) is hereby created under the Office of the
President. The Board shall be composed of eighteen (18) members: one (1)
sitting as Chairperson, one (1) as Co-Chairperson and sixteen (16) as members.
The Chairperson, Co-Chairperson and members of the Board shall be appointed
by the President. The Chairman shall have the rank and privilege of an
undersecretary while the members shall have the rank and privilege of an
assistant secretary.

. The Board shall be divided into six (6) divisions with three (3) members per
division. There will be two (2) divisions in Luzon, two (2) divisions in Visayas
and two (2) divisions in Mindanao.

. All members of the Board shall have at least ten (10) years experience in the
field of taxation and must not have worked with Bureau of Internal Revenue,
the Department of Finance or any of its attached bureaus or agencies for the
last five (5) years prior to appointment.

. The Board shall be supported by a technical working group which should
comprise of one (1) representative from the Department of Finance, one (1)
representative of the Bureau of Internal Revenue and two (2) permanent
technical staff of the Board. Each division shall have at least three (3) sets of
technical working groups.

. The Board shall have ex-officio members subject to the following:

a) The private sector shall be represented in all divisions of the Board and shall
be invited by the division during the deliberation of cases. Proof of notice
of invitation is sufficient for the division to proceed with the deliberations.
Failure to send out the invitation can be a ground to nullify the decision of
the division. Absence of the private sector despite proof of invitation shall
not affect the validity of the decision.

The private sector shall be composed of one (1) seat for an individual
private tax practitioner, one (1) seat for law or accounting firms and one
(1) seat for tax advocacy groups or organizations.

Accreditation of individuals and firms shall be done through presentation of
proof of their license as a lawyer or as a Certified Public Accountant or
registration as a firm.

d) Tax advocacy groups or organization need to present proof of existence for
at least three (3) years for accreditation with the Board.

Accredited firms, groups or organizations shall submit a list the names of
the representative of their firm, group or organization, in which case, the

b)

¢

e


list should not exceed three representatives who can alternately attend
deliberations.
f) The Board shall create a pool of ex-officio members, once a member is
appointed, he shall become the permanent member unless for valid ground
is removed by the Board upon proper notice or upon voluntarily resignation
of the member.
All accreditations and appointment will be approved by the Board sitting en
banc.
The private sector representatives shall be given honoraria as allowed under
the law.
i) The private sector will not have the power to vote on the decisions of the
division. However, they may make recommendations, dissenting,
concurring or separate opinions.

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h

6. The Board shall have the power to review, reverse or amend the decisions or
resolutions of the Commissioner of Internal Revenue. A majority vote of each
division is needed to reverse or modify the decision or resolution of the
Commissioner of Internal Revenue.

B. Jurisdiction - The Board shall have jurisdiction over the following cases as
herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges,
penalties in relation thereto, or other matters arising under the National
Internal Revenue or other laws administered by the Bureau of Internal
Revenue.

2. Inaction by the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges,
penalties in relations thereto, or other matters arising under the National
Internal Revenue Code or other laws administered by the Bureau of Internal
Revenue, where the National Internal Revenue Code provides a specific period
of action, in which case the inaction shall be deemed a denial.

C. Power to Administer Oaths; Issue Subpoena; Punish for Contempt. - The Board
shall have the power to administer oaths, receive evidence, summon witnesses by
subpoena, subject in all respects to the same restrictions and qualifications as applied in
judicial proceedings. The Court shall, in accordance with Rule seventy-one (71) of the
Rules of Court, have the power to punish for contempt for the same causes, under the
same procedure and with the same penalties provided therein.”

D. Procedure for appeal -


1, Ataxpayer aggrieved by the decision of the Commissioner of Internal Revenue,
may within a period of thirty (30) days from receipt of the decision or after the
lapse of the period of inaction as provided under the National Internal Revenue
Code, as amended, file a notice of appeal to the Board and to the Commissioner
of Internal Revenue. The taxpayer also has the option of filing an appeal
directly to the Court of Tax Appeals without going through the Tax Review
Board.

2. The notice of appeal filed before the Board and the Commissioner of Internal
Revenue shall state if a decision was rendered or if the Commissioner failed to
act within the period prescribed by law. In case a decision was rendered, a
legible copy shall be attached to the notice of appeal. Within ten (10) days from
receipt of the notice of appeal, the Commissioner of Internal Revenue shall
elevate a copy of the decision and/or resolution to the Board, together with the
entire records of the case with all pages appropriately numbered correlatively.

3. Within ten (10) days from the receipt of the records, the Board shall inform the
taxpayer that it has received the records and shall set the case for preliminary
conference. Only stipulations of facts and limitations of issues shall be
discussed during the preliminary conference. The Board may, motu proprio or
upon motion, initiate discussions on the payment of the correct taxes. Within
fifteen (15) days from the termination of the preliminary conference, the parties
shall file their respective position papers. Except upon meritorious grounds, the
preliminary conference shall be terminated within thirty (30) days from date of
the first preliminary conference hearing.

4. In case discussions on payments were conducted by the Board, the
Commissioner of Internal Revenue or the taxpayer may move that the case be
transferred to another division.

5. The filing of an appeal to the Board shall toll the running of the prescriptive
periods to file an appeal before the Court of Tax Appeals.

6. The Board shall resolve all matters appealed to it within a period of one hundred
eighty (180) days from date of termination of the preliminary conference. The
party adversely affected by the decision of the Board shall have thirty (30) days
to file an appeal before the Court of Tax Appeals from the time of receipt of
the decision or the lapse of the one hundred eighty (180) day period to decide
the case.

7. The Board shall have the power to promulgate its own rules and regulations to
implement the provisions of Section 9 of this Act.

E. Transparency-


. All decisions rendered by the Board shall be published in its official website and
other medium as determined by the Board.

. Recommendations, separate, concurring or dissenting opinions of ex-officio

members shall form part of the decision that will be published.

All cases which were not acted upon shall likewise be published.

. If there are any allegations of graft and corruption made by the taxpayer in the
course of the proceedings, the Board shall refer the same to the Department
of Finance.

N

ae

m

Funding - The Board shall be provided with an initial annual allocation of Fifteen
million pesos (P15,000,000.00) to be drawn from the budget of the Office of the
President. Appropriations for the succeeding years shall be incorporated in the budget
proposal for the Office of the President.

SECTION 9. Taxpayers Assistance Programs -

A. The Public Attorney's Office is hereby mandated to create a special unit within
their offices dedicated to render free legal advice on tax concerns of taxpayers within
their area of jurisdiction. Provided, that the taxpayer's gross sales or receipts do not
exceed the amount prescribed under Section 109 (W).

B. The Secretary of Finance shall enhance the effectiveness of the Taxpayers
Assistance Service of the Bureau of Internal Revenue.

SECTION 10. Bank Secrecy Law. — The provisions of the bank secrecy law,
notwithstanding and in addition to the authority of the Commissioner of Internal Revenue
to inquire into bank deposits for the purpose of determining the gross estate of a
decedent and the financial incapacity of a taxpayer to pay his taxes if he applies for
compromise, the Commissioner may also inquire into bank deposits of taxpayers without.
need of a court order. As such, the provision of Section 6 (F) of the National Internal
Revenue Code, as amended, is hereby amended to read as follows:

SECTION 6. Power of the Commissioner to Make
Assessments and Prescribe Additional Requirements for Tax
Administration and Enforcement. ~

(F) Authority of the Commissioner to Inquire into Bank
Deposit Accounts and Other Related information held by
Financial Institutions. - Notwithstanding any contrary
provision of Republic Act No. 1405, Republic Act No. 6426,
otherwise known as the Foreign Currency Deposit Act of the
Philippines, and other general or special laws, the
Commissioner is hereby authorized to inquire into the bank


deposits and other related information held by financial
institutions of:

OK

(4) ANY TAXPAYER WHOSE RETURN IS SUBJECT TO
EXAMINATION AND ASSESSMENT FOR THE PAYMENT
OF THE CORRECT AMOUNT OF TAX, PROVIDED THAT,
THERE IS PRIMA FACIE EVIDENCE THE TAXPAYER
FILED A FALSE OR FRAUDULENT RETURN WITH
INTENT TO EVADE TAX. PROVIDED, THAT, THE
COMMISSIONER SHALL NOTIFY THE TAXPAYER OF
HIS INTENTION TO LOOK INTO THE ACCOUNT OF
THE TAXPAYER UNDER SUCH RULES AND
REGULATIONS AS MAY BE PRESCRIBED BY THE
SECRETARY OF FINANCE UPON RECOMMENDATIONS
OF THE COMMISSIONER.

SECTION 11. Performance Target. - The Secretary of Finance, through the
recommendations of the Commissioner of Internal Revenue and Commissioner of
Customs, shall develop holistic performance indicators containing revenue collection
performance (against target and against previous year), tax administration functions and
other relevant priorities of the government that is not solely based on revenue collection,
and, which shall be made as basis for attrition and incentive programs. As such, Section
5 of Republic Act No. 9335 otherwise known as the “Attrition Act of 2005” is hereby
amended to read as follows:

SECTION. 5. Incentives to District Collection Offices. -
In the event that the BIR or the BOC fails to meet its [revenue]
PERFORMANCE target by less than ten percent (10%) WHERE
APPLICABLE, the revenue districts, in the case of the BIR, or the
collection districts, in the case of the BOC, which exceed their
respective allocations OR ASSIGNMENTS-of the PERFORMANCE
[revenue] target [(allocated target)], shall be entitled to rewards and
incentives (district incentive) amounting to ten percent (10%) of the
excess over its allocated REVENUE target: Provided, however, That
any BIR revenue district or BOC collection office which deliberately
foregoes any revenue collection in a given year as part of a scheme
to avoid a higher allocated target for the subsequent year shall not
be entitled to a district incentive in such subsequent year
notwithstanding its having exceeded its allocated target: Provided,
further, That the allocated target of any such district shall have been
reported to and validated by the DBCC as required in the immediately
preceding section.


SECTION 12. Separability Clause. - If any provision of this Act is declared
unconstitutional , the remaining parts or provision not affected thereby shall remain in
full force and effect.

SECTION 13. Repealing Clause. - All laws, decrees, executive orders,
implementing rules and regulations, issuances, or any part thereof inconsistent with the
provisions of this Act are deemed repealed, amended or modified accordingly.

SECTION 14. Effectivity. - This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in a newspaper of general circulation.

Approved.