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I HAVE always thought of life as a coin – a small, round piece of metal with two faces. It is already a truism that when you flip a coin, there is always a 50% probability that you would get a “head” and 50% probability that you will get a “tail” – either head or tail and not both, but no other choices either.

Based on the recent pronouncements from the Bureau of Internal Revenue (BIR), we expected to see improvements in the way the Bureau treats the taxpayers. There has been a promise that we can expect to see a “new” BIR. In a recent forum on policy developments, a key officer of the Bureau emphasized that taxpayer service will be a focus of the BIR. This is a shift from the position held by the previous commissioner. The focus and efforts of the Bureau then were solely on tax compliance and enforcement. Indeed, we are seeing some changes being made, and we do commend the new BIR administration on these; but the question we need to ask first is: How does the BIR define taxpayer service? The relationship between the BIR and a taxpayer has always been cordial at best and adversarial at worst. One party usually eyes the other with some reservations. Given this state of a relationship, does the BIR understand the customer experience that taxpayers look for? If the BIR is not clear about this, there will always be a gap between the expectation of taxpayers and the quality of service that BIR is providing. Both sides will be frustrated. Several studies show that it is critical for suppliers of services to manage customer satisfaction. To this end, there is a common view that a supplier must have an accurate understanding of its customer’s expectations, the customer value proposition. The supplier must strive to deliver such values consistently throughout the customer’s journey. While this is a big challenge, the BIR has the capability to provide better and efficient services. It should strive to provide it. I am not aware if a study has already been conducted by the BIR to determine the quality of service that a taxpayer seek. But based on my experience as a tax practitioner, I see that taxpayers, both individual and corporate, demand security and confidentiality in their tax information, ease of access and dealings, consistency in the use of tax policies and procedures, speed in processing, and fairness and transparency throughout. They expect these qualities of service to be provided to them always in all their transactions with BIR—from the time they are required to register as taxpayer, during the period when they are expected to file tax returns and submit information, and throughout the entire period they remain a taxpayer. To truly deliver better taxpayer service, BIR must map out the different transactions that it has to make with taxpayers and, for each of these touch points, review and evaluate them to ensure that its delivery of services meets the quality expectations of the taxpayers. This is a big task, and the BIR should seriously consider it if it is its intention to serve its constituents better. To emphasize this point, let’s consider, for example, a start-up company that has to register its business for tax purposes. BIR has to assess whether the current rules to register a business—the requirements and processes that the new company needs to go through—are clear, streamlined if possible, and easily accessible. The BIR should also look at the current channels of registration. Do the BIR website and other sites on the internet that businesses would normally visit contain information about corporate registration? Does the BIR system allow online applications—including submission of documents—and send the status of application or notification of approvals online, as well? Or will it continue to require applicants to go to the BIR offices and wait for hours to be attended to? Can the processing of the approval be expedited and can the taxpayer be notified in time in case there are questions or concerns regarding its application? If there are indeed concerns, how fast will these be evaluated and resolved? Is it clear who the decision-maker will be? Obviously, to meet taxpayer expectations, much work has to be done. To me, for the “new” BIR to happen, it requires a set of organizational capabilities, and a drastically different mindset and culture. BIR has to study if it has the right organizational structure, the right people to understand the changing environment and the capability to identify the changes it can introduce under a situation on a limited budget. This process also requires a thorough evaluation of the current tax laws to determine if there are provisions that need to be amended or scrapped altogether because they restrict the Bureau from adopting new practices. We have several examples of government agencies that have been successful in improving the services they provide to the public. With the right tone and strong drive from the top, I am confident that we can have a “new” BIR. Marivic Espano is the Chairperson and CEO of P&A Grant Thornton. P&A Grant Thornton is one of the leading Audit, Tax, Advisory, and Outsourcing firm in the Philippines, with 21 Partners and over 700 staff members.

With the Duterte government’s aggressive pursuit of reforms to bring about a simpler, more equitable and more efficient tax system that can encourage investment, job creation and poverty reduction, the Department of Finance (DoF) recently presented its proposed Tax Policy Reform Program as of Sept. 28. The proposed tax policy packages cover several areas of the tax system such as the personal income, consumption, corporate income, property and capital income taxes.

The business landscape is being continuously reshaped by globalization, by advances in technology, by demographic and political shifts, and by transformational innovation and disruptive business models. For accountants, there is a two-fold challenge to this constant reshaping: first, the need to assess the implications of these transformative forces to the business of the organizations they serve; and second, the need to prepare and equip them adequately to address these changes. In response to the foreseen challenges, the Board of Accountancy increased the continuing profession development (CPD) unit requirements for Certified Public Accountants (CPAs). The Philippines, being a member of the International Federation of Accountants (IFAC), is mandated to comply with and increase the CPD units to 120 from the current 60 CPD units. Over a three-year period, the required CPD units will be increased with increments of 20 units per year starting in 2017. The declared increase in CPD units has not been well received but rather is viewed as costly, in terms of finances and time investment. The reaction stems from the common understanding that CPD units can only be earned through traditional training. However, further study of the pronouncement shows that only 40 units are required to be earned through training covering three broad thematic areas: Technical Competence (30 units), Professional Skills (5 units), and Professional Values, Ethics and Attitudes (5 units). The rest of the units can be earned through various modes, in keeping with the view that learning is a lifelong process and not strictly confined to activities in the workplace. The other sources of CPD units include completing a post-graduate degree, participating in fellowships, authoring books, doing creative projects, inventing programs or solutions, writing articles, speaking in workshops and conventions, and other self-directed learning activities. It is the hope of IFAC that through a more robust CPD program, CPAs can choose modes of learning that suit specific needs in preparation for the challenges ahead. With the aim to assist CPAs to comply with the CPD requirements, our firm through the P&A Grant Thornton Academy offered a curriculum called Learning Excellence in Accounting Practices (LEAP). As we endeavored to educate fellow professionals, it has become apparent in our interactions with them that the role of the accountant has transitioned towards that of being a business advisor and partner for the companies they serve. Apart from the technical rigor, accountants need to revisit their crucial role to all stakeholders, not just to management. There is growing consensus to provide focus on a holistic view of complexity, risk, and performance. Such a holistic perspective must account for the complexity of modern business and encompass financial and non-financial indicators of a company’s status and potential. Reporting should also assess organizational health, performance, and prospects alongside their impact to the communities wherein they operate. The profession is also called to address public concerns when it comes to establishing trust and ethical leadership. The profession could do more to highlight and prevent small-scale financial irregularities up to thwarting major systematic failures that helped cause the global financial crisis and the ensuing economic uncertainty. Even though the above demands seem daunting, our experience in working with fellow CPAs proved to us that we are more than ready to take on the challenge of the profession. The breadth and depth of what we can do to influence economic development is vast and far-reaching, making it impossible to look at our calling with frigid passivity or apathy. CPAs are the unsung heroes in fiscal management and good ernance. We are the quiet vanguards of transparency and accountability. We are the silent workers who build and strengthen the financial ecosystem so our economy can grow robustly and sustainable. We are the obscure leaders whose influence cuts across all sectors in society. We are the defenders and guardians of integrity that our collective conscience is in dire need to be infused with. We are so many things, we have so much to do, and if done well, we can make a whole lot of difference. The pace of the global expansion of firms from developed and developing markets alike is taking the spotlight to the accountant’s ability to master the technical, language and cultural challenges of cross-border operations. An agile mind with a global orientation is crucial to successfully navigate the nuances of working within a high diversity hyper connected workplace. CPAs need to continually learn, adapt, and evolve to be relevant to the business landscape that is continuously being reshaped. Jahleel-An Burao is a managing consultant, Advisory Services of P&A Grant Thornton, one of the leading audit, tax, advisory, and outsourcing firms in the Philippines, with 21 Partners and over 700 staff members. JAHLEEL-AN BURAO

For the past months, the push for tax reform has been increasing, to rationalize our 19-year-old Tax Code in response to our changing economic environment, including the impact of ASEAN integration. Among the issues surfacing in the news are: updating the tax brackets for individual income tax, reducing corporate income tax rates, and simplifying certain tax administration procedures. Not to be left behind is the possible reform of the withholding tax system, particularly on the expanded withholding tax (EWT). This article focuses on EWT.

Guidelines in securing importers and broker's BIR clearances

Roald Dahl, one of the greatest children’s book authors, once said, “A little nonsense now and then, is cherished by the wisest men.” This came to my mind when I heard that some executives are hooked on Pokemon Go. Pokemon Go is an augmented reality geo-tagging game for your tablet or smartphone. Some of the characters can be caught in real time in the office, public spaces or even roads. This is the latest mobile game sensation that has captured the interest of tech savvy millennials, and apparently, of many company executives. So, is the idea of executives playing computer games like Pokemon Go nonsensical? Does it only make sense if these games are played only by millennials, even those who are company employees? Is it okay if the games are played during office hours? Does playing computer games on company hours affect productivity? We were asking the same things when Facebook was being introduced. In our age demographics, where the veterans are mainly retired and the baby boomers are retiring or near retirement, many found Facebook counter-work-productive while the Generation X’ers and the early millennials (who are now the management) were able to use Facebook to their business advantage. Facebook has become so common and omnipresent that it is being used literally every minute. Executives, nowadays, use Facebook while in transit, while waiting for a client to show up for a lunch or dinner appointment, or even while a meeting is ongoing. In essence, Facebook is now used during company hours. (By the way, at P&A Grant Thornton, everyone has been granted access to Facebook.) But Facebooking is way different from computer gaming. Facebooking is usually a quick peek on posts of friends while gaming is too engaging and takes time. Gaming is literally taking a longer break from work. A bit like playing golf. However, unlike golf where executives play with clients and, therefore, takes the form of a marketing activity, computer gaming is usually by the player’s lonesome and therefore totally personal in nature. Despite this, studies have shown that many computer games have educational, physical, and psychological benefits for players. Some train the brain to perform better in real-life situations and video game brain training has the same effect as reading a book because they make the brain learn and thousands of neurological connections are made. Games are even touted to mold leaders as players develop skills like collaboration and building alliances, efficient use of resources, focus on strengths, and confronting enemies. Realizing this, smart teachers, educators and trainers have included plays and games in their learning sessions. Silicon Valley companies are now into gamification, the process of incorporating gaming elements (game mechanics and psychology) into their work processes to improve employee engagement and productivity. Gaming is also mainly about taking a break. We all know that work breaks help reduce stress, improve concentration and focus, and increase productivity. Schoolchildren become more attentive to academics after having recess; so how different are we from them? Thus, companies are mandated to have regular work breaks, usually called coffee breaks, in the morning and in the afternoon. At our company, P&A Grant Thornton Outsourcing, Inc., we even have a “Me Time” — a ten- minute lights off break (in addition to the regular breaks) where everyone is encouraged to do their personal stuff including Facebooking, playing, chatting, meditating, walking around, reading magazines and probably playing Pokemon Go. Me Time is into its third year and is still warmly embraced by the staff. But there also has to be a balance between breaks, playing games and getting back to work. Game addiction is also a growing problem not only among children but also among workers. It takes someone with significant self-control to walk away from an ongoing game because a break has ended. Does playing computer games on company time improve productivity? We haven’t come across a study correlating gaming during office hours with productivity. We have heard of Silicon Valley types of companies where gaming is totally allowed but the employees are technically not working by the clock but by deliverables. Even then, with gamification, these companies are weaving the games into the work making full time gaming by employees irrelevant. How about management playing games? I’ve heard of executives who play Sudoku and Solitaire and of younger managers who play DOTA 2 and League of Legends, all popular and addictive computer games. Almost all play outside company time. All of them call it relaxing and de-stressing and they believe they sharpen their mind and their reflexes. Roald Dahl is right all along – smart people know that indulging in nonsensical things, now and then, can be a cherished thing. Jessie Carpio is a Partner and Head of BPS/Outsourcing of P&A Grant Thornton and concurrently President of P&A Grant Thornton Outsourcing Inc., an entity wholly owned by P&A Grant Thornton. P&A Grant Thornton is one of the leading Audit, Tax, Advisory, and Outsourcing firm in the Philippines, with 21 Partners and over 700 staff members.

The Department of Finance submitted to Congress last week the first package of proposed tax reforms. The proposals include the restructuring of the personal income tax (PIT) system; expanding the value-added tax (VAT) base by reducing the coverage of its exemptions; adjusting excise taxes imposed on petroleum products; and, restructuring the excise tax on automobiles except for buses, trucks, cargo vans, jeeps, jeepney substitutes and special purpose vehicles. These proposed tax reforms, however, received varying reactions from stakeholders. For purposes of this article, I will be focusing on certain proposed amendments on value-added tax (VAT). The good news is that the proposed tax reforms do not include an increase in the VAT rate. However, the coverage of VAT-exemption and VAT zero-rating will be limited. Even the crediting of input VAT (i.e., VAT on purchases) against output VAT (i.e., VAT on sales) will be limited to the current year. Under the proposed tax reforms, any excess input VAT over output VAT for the quarter may be carried forward to the next quarter of the same year. Any input VAT at the end of the last quarter of the year shall not be carried over to the succeeding taxable year, but the excess input VAT may be refunded. This proposed amendment will put the burden on the taxpayer to file a claim for refund in order to recover the excess input VAT, on which we all know is a very long and tedious (and sometimes painful) process. Another proposed amendment is limiting the definition of export sales subject to 0% VAT to (1) direct exports; (2) sales to international shipping and air transport operations; and, (3) sales of export products to another producer or export trader. Item no. (3), however, will be deemed to be export sales subject to VAT zero-percent only when actually exported by the buyer-exporter. If this provision is passed into law, the question is how it will be implemented. Will the seller be required to issue a bond which will be subjected to liquidation upon proof of actual exportation by the buyer-exporter? Or will the sale first be subject to VAT, with a claim for refund filed upon actual exportation? On the other hand, under the proposed amendment, the following sale of goods and services that currently enjoy VAT zero-rating (i.e., subject to 0% VAT) will be subject to 12% VAT: • sale of raw materials to a nonresident buyer for delivery to a resident local export-oriented enterprise • sale of raw materials to export-oriented enterprises • those considered export sales under EO 226 • sales to entities exempt by virtue of special laws • services to entities exempt under special laws • services to entities engaged in international shipping or air transport • services to export-oriented enterprises Accordingly, purchases of PEZA-registered entities and Board of Investment registered enterprises that export 100% of their products, among others, will be subject to 12% VAT. These entities, however, still have the option to claim refunds on their unutilized input VAT related to their zero-rated sales. I do not know any taxpayer who takes pleasure in filing a refund claim with the Bureau of Internal Revenue (BIR), due to the additional time and cost to be shouldered by the taxpayer-claimant. As we all know, a significant number of taxpayers who filed claim for refund resorted to filing cases with the Court of Tax Appeals (CTA) due to BIR’s inaction on their claims. Although the Tax Code provides for a specific period in which the BIR should process the refund (i.e., 120 days), unfortunately, if such period has lapsed, the refund is deemed denied. Hence, any inaction of the BIR is detrimental to the taxpayer-claimant. If our government pursues the proposed amendments, it should ensure first that we have an effective and efficient refund process. To achieve this, there might be a need to amend Section 112 of the Tax Code (refund provisions of the Tax Code). Among the amendments it may introduce is a “deemed approved” provision in case of inaction by the BIR. Such provision is being implemented in other countries to ensure that the tax authority performs its duty within a reasonable period of time to ease the burden of a taxpayer. Another provision that may be considered is imposing interest on refunds in case they are not be processed or approved within the prescribed period. This would allow the taxpayer-claimant to recover the cost of money in case of significant delay beyond his control in processing his refund. Otherwise, if the foregoing proposed amendments are implemented without improving the refund process, our ease of doing business rankings my further drop. In the World Bank Group’s Doing Business 2016 report released last year, the Philippines’ ranking dropped six notches to 103rd in 2015, across 189 economies. According to the report, among the Association of Southeast Asian Nations (ASEAN), it would be easier doing business in Singapore, Malaysia, Thailand, Brunei Darussalam, and Vietnam than in the Philippines. Moreover, in the World Economic Forum’s (WEF) Global Competitiveness Report 2016-2017, the Philippines fell 10 notches to 57th out of the 138 economies assessed. Among the most problematic factors in doing business in the Philippines cited by WEF are inefficient government bureaucracy and taxation. Hence, if our government desires to improve our competitiveness ranking, significant reforms in business registration and taxation, among others, are necessary. Reforms that would alleviate the already cumbersome compliance requirements in doing business in our country. Reforms that would facilitate voluntary compliance to the maximum extent possible. Reforms that would give the next generation a better future. Edward L. Roguel is a partner of the Tax Advisory and Compliance Division of Punongbayan & Araullo.