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Let's Talk Tax

The parable of the tax collector… and the taxpayer?

Atty. Olivier D. Aznar Atty. Olivier D. Aznar

In the Christian scriptures, Jesus shared this parable to those who were convinced of their own righteousness and despised everyone else:

“Two people went up to the temple area to pray; one was a Pharisee and the other was a tax collector. The Pharisee took up his position and spoke this prayer to himself, ‘O God, I thank you that I am not like the rest of humanity — greedy, dishonest, adulterous — or even like this tax collector. I fast twice a week, and I pay tithes on my whole income. But the tax collector stood off at a distance and would not even raise his eyes to heaven but beat his breast and prayed, ‘O God, be merciful to me a sinner.’ I tell you, the latter went home justified, not the former; for everyone who exalts himself will be humbled, and the one who humbles himself will be exalted.”

The parable is one of the more fitting passages for reflection during Lent, and the story definitely has a spiritual meaning attached to it. The account has two main characters: the tax collector (the Publican, in some versions); and the Pharisee.

In reading the description of the characters, one might wonder why the tax collector appeared to be associated with wicked persons. Well, such attribution has a historical context that we can read in the literature about the Jews and the Roman Empire. At present though, stumbling upon such portrayals of tax collectors might not be a good idea for a taxpayer who just had an unreasonable tax audit. Of course, it would be unfair to think the same of our government tax collectors, given the different setting and circumstances.

Close examination of the parable, however, would lead us to focus more on the other character — the Pharisee. In the parable, the Pharisee seemed to be proud of his being good and upright — perhaps, he believed that he did not have any fault, committed no error, and can fully support his beliefs about himself. Would some taxpayers relate to this claim? For taxpayers who are compliant with the tax rules, there is no problem; but for those who make the claim without first checking on themselves, there might be a problem.

In claiming to be compliant, a taxpayer should remember that this can always be challenged by the tax authorities. In our country, the tax audits could come from the Bureau of Internal Revenue (BIR), from Local Government Units (LGUs), or from the Bureau of Customs (BoC).

With the BIR, as the April 15 income tax filing has passed, taxpayers may expect that taxable year 2018 will now included in the pipeline for possible BIR full-scope audits. Remember that the supposed extensive tax amnesty proposal has been reduced in scope. While the estate tax amnesty and the tax amnesty on delinquencies, under Republic Act 11213 and the related Revenue Regulations No. 4-2019 recently issued, are welcome developments for taxpayers, the taxpayers may continue to anticipate thorough tax inspections by the BIR covering the open taxable years.

On the other hand, it was previously reported in the news that Philippine companies should be ready for potential BoC audits as a result of the recent signing of the BoC’s Customs Administrative Order 01-2019. The order implements the post-clearance audit function of the BoC. That function was previously transferred to the Department of Finance in 2014, and was then subsequently returned to the BoC in 2017, a year after the Customs Modernization and Tariff Act was signed into law. Those affected by these developments are involved in import transactions. There have also been discussions that quite a number of BoC audit notice letters have been issued or are waiting to be released to the subject companies. Hence, this is something to watch out for.

Another notice of audit that a taxpayer may expect is issued by LGUs. The frequency and extent of these audits varies by jurisdiction; what they all have in common is that this audit, which mainly focuses on the examination of the taxpayer’s gross receipts/income, is another test that could pose a challenge to tax compliance.

In anticipation of the above types of tax audits, not to mention other regulatory requirements or examinations, it would be worthwhile for taxpayers to reflect and revisit their tax practices and relevant records. With the countless BIR issuances, BoC orders, LGU tax ordinances, and other rules, it would be prudent for the taxpayer to check the proper use of their manpower and other resources and to consult with experts. These measures would help ensure that a taxpayer does not fall into the danger of claiming “false self-righteousness” as in the parable. Otherwise, the risk will always be there — that a taxpayer could be “humbled” in a tax audit that might hit like an unexpected earthquake.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.


Olivier D. Aznar is a partner from the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.


As published in BusinessWorld, dated 30 April 2019