Some things for taxpayers to consider before the elections

It is barely two weeks to the May 9 elections. For months, we have been hearing many promises from the presidential candidates, and it cannot be denied that one of the things that might win over a voter is a candidate’s take on tax reform. To be sure, tax reform is one of many aspects of governance that a president needs to consider, apart from fighting crime and corruption, defending sovereign territory, and growing the economy, to name a few. But what makes many of these initiatives possible is a well-managed treasury, funded by the taxes we pay. Therefore presidential candidates really ought to speak more about what they plan to do with the tax system.

I’m not sure if tax reform has ben sufficiently discussed during the campaign, though we have heard much about the need to overhaul the 20-year old tax system, to reduce both corporate and individual tax rates, to remove the BIR Commissioner, promises that may reflect mere posturing to win votes.

Still, many taxpayers are wondering whether the candidates are attuned to their concerns.

Certainly, taxpayers want reform. Many taxpayers we have spoken to believe our present tax system is not fair.

First, on the crucial issue of timely updates to the individual income tax bracket, much has been said. It does not take an expert to conclude that tax brackets first determined in 1997 need to be updated. Why does more time need to pass before this matter is addressed? More to the point, can this be resolved within the first-100 days of the new presidency?

Second, there is considerable anxiety that the government’s efforts are tilted towards assessing tax due, with no corresponding effort to promptly give back to the taxpayers their refunds. Can the government expedite the tax refund process? Would it NOT be fair to charge interest on delayed tax refunds, to go with the 20% interest charged on tax deficiencies?

Third, in relation to tax assessments, many taxpayers want BIR revenue examiners to be more accountable for their actions. Not a few claim to be victims of harassment, typically when some examiners assess massive tax deficiencies without careful evaluation of the facts and the tax rules. There are taxpayers who believe that examiners are transferring to them the burden of proving they have no tax deficiencies. Can this burden be shifted to the examiner whose findings will need to stand up in court? And if the examiner is found guilty of trying to bluff his way into large tax assessments, how will he be punished?

Fourth, with respect to the withholding tax system, particularly on withholding tax deficiencies, the penalty of non-deductibility of the related expense, in addition to withholding tax deficiency due, is too harsh. Taxpayers are complaining that the purpose of the withholding tax system is for the companies merely to act as agents, on behalf of the government, to collect from “other taxpayers” for remittance to the government. More to the point, instead of the government expending more effort on tax collection, the company-agents are doing so for the government. Is this form of “help” not recognized by the government? Taxpayers just don’t see the justice of severe penalties connected with their efforts to help the government to collect taxes.

The above concerns could be trivial compared to the enormous problems that the incoming president would face. But on the part of the taxpayers, such concerns are not insignificant. It is clear that tax reform requires the cooperation of Congress and other agencies. But, without question, the new president will be the biggest player in pushing tax reform solutions forward.

As a taxpayer, do you believe your presidential candidate is serious about tax reform? Let the answer be reflected in your ballot for the May 9 elections.

Olivier D. Aznar is a partner with the Tax Advisory and Compliance division of Punongbayan & Araullo.