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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Seventeenth Congress
First Regular Session

House Bill No. 4601

Introduced by Representative Dakila Carlo E. Cua

EXPLANATORY NOTE

Tax administration is the heart of taxation. Though the quality of tax laws as to
what and how much to exact matters, it is still how taxes are actually collected
which is the be-all and end-all of every government's fiscal standing. Tax
collection indeed “brings the fruits,” so to speak. And the Philippines, given the
current hurdles it has in collecting the right taxes, knows fully well that effective
tax administration is indispensable.

This measure aims to create data linkages between the Bureau of Internal
Revenue (BIR) and the country’s taxpayers who are utilizing cash-register and/or
point-of-sales machines (CRM/POS machines) with the end view of increasing
value-added tax (VAT) collections, removing burdensome compliance
requirements and promoting transparency in businesses with bulk transactions.
If enacted into law, it will greatly help in the early detection of misdeclaration
committed by unscrupulous taxpayers, thereby reducing, if not removing,
“errors” in the reporting of sales and purchases. This bill, which likewise
mandates interconnectivity between the BIR and other appropriate government
agencies, will provide the Bureau of Internal Revenue (BIR) with third-party
information, easier VAT-refund mechanism and data collation, all of which it
could handily use in plugging leakages and overall improvement of tax
administration. Indeed, it puts the Philippines at par with other countries



already employing interconnectivity between the tax authority and sellers of
goods and services.

Accordingly, passage of the measure is earnestly sought

REP.
Lone Djstrict, Province of Quirino


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Seventeenth Cong
First Regular Se:

House Bill No. 4601

sion

Introduced by Representative Dakila Carlo E. Cua

AN ACT MANDATING THE ESTABLISHMENT OF ELECTRONIC LINKAGE
BETWEEN THE BUREAU OF INTERNAL REVENUE AND
VAT-REGISTERED TAXPAYERS UTILIZING CASH-REGISTER
AND/OR POINT-OF-SALE MACHINES

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

SECTION 1. Declaration of Policy. - It is the policy of the State to improve tax
collection and tax administration through the use of information technology in
the processes of the Bureau of Internal Revenue (BIR). It shall also be the policy
of the State to foster cooperation between the Bureau and the taxpaying public
to raise tax collections and encourage compliance to tax laws. Towards this end,
the state shall mandate the Bureau and sellers of goods and services subject to
value-added tax (VAT) to develop a linkage system to record and simultaneously
report sales to the Bureau.

SEC. 2. Creation of the Electronic Sales Reporting System. - ‘The Bureau shall
create an electronic system that will link sales and purchase data entered on
cash register/point-of-sales machines (CRM/POS Machines) of VAT-registered
taxpayers to the Bureau's servers for simultancous reporting of sales and
purchase data



VAT-registered taxpayers shall acquire CRM/POS machines and secure said
machines’ linkage to the BIR’s servers at their expense. They shall likewise
ensure that the CRM/POS machines have the capacity to simultancously
transmit data entered on the machines to the servers of the Bureau of Internal
Revenue.

The establishment by the Bureau of the electronic system and linkage thereto by
VAT-registered taxpayers of their CRM/POS machines shall be done within one
(1) year and six (6) months from the effectivity of this Act.

SEC. 3. Electronic Interconnectivity with the Bureau of Customs (BOC), Land
Transportation Office (LTO), Department of Trade and Industry (DTI), Department
of Agriculture (DA), Securities and Exchange Commission (SEC) and Other
Appropriate Government Agencies, - Within one (1) year and six (6) months from
the effectivity of this Act, the Bureau shall establish electronic interconnectivity
with the BOC, LTO, DTI, DA, SEC and other appropriate government agencies to
further enhance the revenue collection effort of government

SEC. 4. Confidentiality and Compliance with the “Data Privacy Act”. - The
provisions of Section 270 of the National Internal Revenue Code of 1997, as
amended, on unlawful divulgence of taxpayer information shall be strictly
complied with

The data processing of sales and purchase data shall also comply with the
provisions of Republic Act No. 10173 or the “Data Privacy Act”.

SEC. 5. Failure to Link Sales and Purchase Data Entered on CRM/POS machines
to the BIR’s Servers Due to Negligence or Intent to Defraud the Government. ~ Any
VAT-registered taxpayer who fails to utilize CRM/POS machines connected to
the Bureau’s servers in the said taxpayer’s business operations/ transactions
due to negligence or with intent to defraud the government shall pay a penalty
amounting to one-half of one percent (1/2 of 1%) of the annual net income as
reflected in the VAT-registered taxpayer’s audited financial statement for the
second year preceding the current taxable year for each day of violation;
Provided, that payment of the penalty shall be made simultaneously with the
payment for VAT on a monthly basis as provided in Section 114 (A) of the
National Internal Revenue Code of 1997, as amended; Provided, further, that
should the aggregate number of days of violation exceed one-hundred eighty
(180) days within a taxable year, an additional penalty of permanent closure of
the business of the VAT-registered taxpayer shall be imposed.

SEC. 6. Automated Sales Suppression Devices- No person shall purchase, use,
possess, sell or offer to sell, update, upgrade, keep, or maintain any software or
device designed for, or is capable of:


a) suppressing the creation of electronic records of sale transactions that a
taxpayer is required to keep under existing tax laws and/or regulations;
or

4) modifying, hiding, or deleting electronic records of sales transactions and
providing a ready means of access to them.

Any person convicted of a violation of this Section shall be punished by a fine of
not less than Two hundred thousand pesos (P200,000.00) but not more than
Five hundred thousand pesos (P500,000.00) and suffer imprisonment of not less
than two (2) years but not more than four (4) years

SEC. 7. Appropriation Clause. - The amount necessary to implement this Act
shall be included in the General Appropriations Act of the year following its
enactment into law.

SEC. 8. Implementing Rules and Regulations. ~ Within ninety (90) days from the
effectivity of this Act, the Secretary of Finance shall, in coordination with the
Commissioner of Internal Revenue and stakeholders, promulgate the necessary
rules and regulations to faithfully implement the intent and provisions of this
Act.

SEC. 9. Separability Clause. - If any provision of this Act is subsequently declared
invalid or unconstitutional, other provisions hereof which are not affected
thereby shall remain in full force and effect.

SEC. 10. Repealing Clause. - All other laws, acts, presidential decrees, executive
orders, issuances, presidential proclamations, rules and regulations or parts
thereof which are contrary to and inconsistent with any provision of this Act are
hereby repealed, amended or modified accordingly.

SEC. 11. Effectivity Clause, - This Act shall take effect fifteen (15) days after its

complete publication either in the Official Gazette or in at least one (1) newspaper
of general circulation.

Approved,