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.
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.
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.
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.
Internship, Practicum, On-the-job training (OJT); we call it by different names. But it is simply an opportunity offered by business establishments mostly to students interested in their industry—a supervised practical training for students at the company’s offices.
Assessment and collection of taxes -- these are the two chief functions of the Bureau of Internal Revenue (BIR), which is tasked to interpret and implement the provisions of the National Internal Revenue Code of 1997, as amended. To meet the objective, the Tax Code grants broad powers to the Commissioner of Internal Revenue which includes the power to authorize the examination of any taxpayer and the assessment of the correct amount of tax through the examination of any book, paper, record, or other data which may be relevant or material to such inquiry -- commonly known as tax audits.
Selecting and implementing business technology, whether software applications or IT infrastructure, often leads to unexpected complications ranging from budget blowouts to a failure to meet business needs.
