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MOST of us are being kept busy by two things—the First Quarter operations report and the tax filing deadline on April 15. And this being the Philippines, we’ll also be engrossed watching and listening to the candidates campaigning for their respective positions. Thus, it is understandable that only a few have given attention to the additional information being required of individual taxpayers for their Income Tax Return for calendar year 2015.

Nowadays, management itself (especially of those companies that are publicly listed) can manifest that it has designed and implemented internal controls related to financial reporting in several ways. Whenever the chairman, CEO, or the president and the chief financial officer sign the Statement of Management Responsibility accompanying a financial statement, they not only take responsibility for the financial statements but also provide assurances that adequate and effective controls were all in place. The Annual Corporate Governance Report (ACGR) issued by the Security and Exchange Commission (SEC) requires disclosure related to the internal control system of the company. Also, the Code of Corporate Governance specifies that companies establish, evaluate and monitor financial reporting controls to ensure the integrity of financial reports. How does one strengthen the financial reporting and internal control process within one’s organization?

For 2016, the Philippines’ national budget is around P3 trillion and the Bureau of Internal Revenue (BIR) is tasked to collect around P2 trillion. Out of the BIR’s total collection target, about P1.243 trillion is expected to come from income taxes. That is how important income taxes are for the country, accounting for around 41% of the national budget. It is interesting to note, however, that a lot of countries are now shifting their focus to indirect tax. The primary reasons behind the global shift to indirect tax are discussed in an article released by Grant Thornton International (Grant Thornton) entitled “Rethinking Tax: The shift to indirect tax,” and I would like to share this article with you.

The lack of attention to the proper and timely accounting of business transactions has significant consequences. Management is not properly guided when making business decisions, resulting in foregone opportunities or bad decisions that could lead to losses. Reliance on cash flow reports or the movements of funds in the company’s bank accounts, which are used as an alternative basis for assessing the business’ position, poses dangers to decision-making. In this scenario, business owners usually fail to consider other critical aspects affecting the business such as contingent liabilities, unrecorded obligations. Likewise, fraudulent transactions within the organization may go undetected when accounting records are not in order.

The Bureau of Internal Revenue (BIR) is continuously intensifying its efforts in collecting taxes. As a result, more taxpayers are receiving Letters of Authority and being subjected to various forms of BIR examination. Therefore, it is recommended that taxpayers prepare for possible tax audits not just by reconciling their books but also of equipping themselves with knowledge on tax laws and regulations, particularly on the due process applicable to tax examinations.

Companies outsource back-office business processes mainly to boost efficiency and reduce costs. Payroll, HR and accounting processes – the most common to be outsourced – are heavily transactional, and many companies determine that external specialists can execute these far more cost-effectively than they can themselves. It might therefore be expected that providers’ mastery of the relevant technical skills is the critical success factor in any relationship. The intangible aspects of these relationships – a partner’s reliability, trust and other 'non-technical' skills – count as much as (or even more than) harder factors, such as their specialist capabilities, in making outsourcing relationships work.

IMF Resident Representative to the Philippines Shanaka Peiris, in a presentation about the country’s economic outlook for 2016 and the opportunities and challenges ahead, he reported about the impressive growth achieved by the economy in recent years. Peiris said the Philippines’ economic fundamentals, such as real GDP growth, inflation rate, current account balance and general government debt, have been improving. Domestic private demand remains strong, supported by OFW remittances and the rapidly growing BPO sector. He also mentioned that the Philippines continues to have favorable endowments such as a huge English-speaking and literate workforce and an expanding domestic market, which now includes the Asean economic community. Indeed, there is great potential for the Philippines to take off economically.

“I love the Philippines, I Pay My Taxes Right. It’s easy as RFP.” This was the tax campaign theme of the Bureau of Internal Revenue (BIR) launched in 2014. According to the BIR, the concept of love for the country was carried in the RFP campaign. RFP stands for Register, File and Pay which captures the basic steps that a taxpayer should follow to be able to comply with his obligation of “paying right taxes” for nation building. Failure to comply may result in significant financial consequences on the taxpayer, with imprisonment as a worst case.