Continued fuel smuggling, tax system discourage investors—Total exec

By: Amy R. Remo
Philippine Daily Inquirer

7:53 pm | Sunday, July 31st, 2011

Continued fuel smuggling and the changing rules in the Philippine taxation system are increasing the uncertainty for international companies to invest in the Philippines, according to Total Philippines president Ernst Wanten.  At the sidelines of a conference hosted by the Philippine Institute of Petroleum (PIP), Wanten noted that the huge challenges faced by investors in the oil industry remained the “same as they’ve always been” despite the government’s goal of achieving a “level playing field.”  “We’re on the same line with the government on the principle of [having a level playing field]. We can see that and we’re happy with that. It’s simply the capability of doing it, and the way they go about it [collecting
tax or customs duties], which is inadequate,” Wanten explained.

On the issue of fuel smuggling, Wanten admitted that they have a “feeling that smuggling is increasing again.”  “We feel more pressure again from the same illegal players that’s always been there. And everything’s the same as before. There was a point, anyhow, after the new government came in last year, we felt there was a real reduction,” Wanten said.

Wanten added that the PIP, of which Total is a member, has been pushing for measures to curb fuel smuggling. “We’ve even proposed how to tackle it. But it’s more of putting it to work.”  As for the country’s taxation system, Wanten noted that while the oil industry was in favor of properly taxing everybody, the government, however, was not going after the players who were not paying taxes.

“What we’ve seen in the drive of the new government to increase tax collection is that, to us, it just looks like they are looking at [going after] the normal, legal companies. There is a drive to collect more, but we think the way they’re doing it is not good at all. They’re still not tackling the ones who are not paying taxes,” Wanten said.  “The basic [objective] of the drive [to increase tax collection efficiency] is correct. But the way they do it is what we’re not happy with. And it’s a general consensus among [oil] industry players.  It also increases the uncertainty for international companies to invest in the Philippines,” Wanten added.

One of the uncertainties that might drive away investments was the Philippine taxation system whose rules, according to Wanten, were not clear and changed retroactively. And this setup, he said, was a unique thing in the world.  “The rules are not applied in a consistent way and it just increases the uncertainty of doing business in this country. The ideas are right in the government, but at the moment [these are] not rolled out in the right way and it could have a reverse effect,” Wanten warned.

BIR to conduct lifestyle checks on professionals

By VG Cabuag, Business Mirror
Posted at 08/01/2011 8:48 AM | Updated as of 08/01/2011 8:48 AM

MANILA, Philippines – The Bureau of Internal Revenue (BIR) is set to conduct lifestyle checks on professionals – including doctors, lawyers and accountants – in a move to convince self-employed people to pay their proper taxes to the government.  Internal Revenue Commissioner Kim Jacinto-Henares said in a wide-ranging discussion on Friday with editors, columnists and reporters of the BusinessMirror, the Philippines Graphic and radio station dwIZ, that the agency would release to the public “by sector” the names of the country’s highest-paid professionals.
She did not say how the lifestyle check would be conducted, but hinted that it would be similar to the lifestyle checks on government officials.

Henares revealed that during her meeting with the Professional Regulation Commission, she learned there were about 3 million professionals in the country; the BIR’s database only shows around 195,000 of them are paying their taxes.

“Of course, from the 3 million professionals you will deduct the nurses and the seafarers because they are not considered self-employed anymore.” Still, she said the data reveal that the difference between the number of taxpaying and nontax-paying professionals is huge.

“We are asking people to insist that they be issued a receipt by all these professionals,” she said.

According to BIR data, the total income tax remitted last year was around P170 billion. Of this figure, only P9.83 billion came from self-employed individuals; the rest was from those employed whose companies automatically deduct their taxes from their salaries (withholding taxes).

Based on the income-tax returns filed in April, the P9.83 billion was paid by 1.69 million people who declared
themselves self-employed; they included those who run their own businesses. Professionals are included in the self-
employed category.

Finance Secretary Cesar Purisima said the tax remittance was “too small”; each of them paid only an average of
P5,800 in income taxes. Computed, this meant they declared earning only less than P20,000 the year before.

“I think they [income tax payments] should be higher. It does not make sense when you compare them with the
average payment of those who are employed. It’s not believable,” Purisima said earlier.

“We would be zeroing in on this sector [self-employed]. We are encouraging them to come forward and go to the
[BIR], and pay the deficiency tax to avoid penalties,” he said.

The BIR has said it would go after the P23.38 billion in additional revenues from the 57 tax cases it has filed under
the Run-After-Tax-Evaders program of the Aquino administration. Of these cases, six have been filed with the Court
of Tax Appeals, including that of Mariano Lim Gaw Jr., the current biggest tax-evasion case.

The BIR is seeking to collect at least P5.5 billion from Gaw for underdeclaring his income in 2007 and 2008, and
for failing to remit value-added tax returns to the government in 2008. The case against Gaw was filed with the
Department of Justice (DOJ) on August 26, 2010; the DOJ ruled there was probable cause.

Gaw, who owns Mega Packaging Corp., allegedly bought 10 parcels of land in 2007 and 2008 for P4.11 billion and
sold them for P8.41 billion within a year.

Twenty-five of the 57 cases are up for resolution at the DOJ and 12 are still under preliminary investigation.

BIR orders building owners to ensure tenants are registered tax payers

OWNERS of commercial establishments will now be required to ensure that their tenants are registered taxpayers, according to the latest issuance of the Bureau of Internal Revenue (BIR).  The BIR has begun its drive to track the untaxed sector with Revenue Regulations No. 12-2011, issued on July 25.

The latest tax regulation sets the reportorial requirements for establishments leasing commercial spaces.  “It shall be the primary responsibility of all owners or sub-lessors of commercial establishments/ buildings/spaces to ensure that the person intending to lease their commercial space is a BIR- registered taxpayer,” the issuance stated.  Their tenants must have a tax identification number (TIN), a BIR Certificate of Registration and duly registered receipts, it added.

These requirements ensure that those engaged in retail remit value-added taxes and income taxes to the government.  Under the new issuance, building owners will now be required to submit, under oath, a tax registration profile of their lessees to the BIR twice a year.(BIR)