BIR’s five-year plan outlines tax administration improvements

THE BUREAU of Internal Revenue (BIR) has released the details of its strategic plan reaching well into the next government, by which it intends to effect improvements in tax administration.
BIR Commissioner Kim S. Jacinto-Henares on Feb. 15 issued Revenue Memorandum Order No. 6-2016 detailing the bureau’s Strategic Plan 2016-2020.

“The BIR continues to face challenges in terms of strengthening revenue collection for the government to fund social and infrastructure commitments to the community,” the plan read.

The bureau’s road map spells out strategic objectives, programs and initiatives to achieve collection targets and sustained collection growth as well as improved taxpayer satisfaction and compliance.

For this year, the BIR identified 26 priority programs that would advance its automation efforts and strengthen law enforcement to encourage taxpayer compliance.

The desired outcomes, according to the bureau’s medium-term strategic plan, will depend on the following:

• Strengthening good governance via an annual plan, implementing an enterprise risk management framework and adopting a performance dashboard for the agency, among others;

• Improving assistance and enforcement by expanding the bureau’s contact center, streamlining the ruling request process, and re-engineering the registration process;

• Improving integrity, competence, professionalism and satisfaction of human resources through an enhanced remuneration framework and a standardized assessment process.

The BIR also cited the improvements made in tax administration over the recent years. These include the “significant growth” in its collection and the utilization of technology and provision of electronic services.

“The goal is to build on the investment we have made in improving our business processes and our IT (information technology) systems, and further transform the administration of the tax system,” the strategic plan read.

The next commissioner may choose to retain or scrap the five-year strategic plan that covers most of the next administration’s term, Ms. Jacinto-Henares said in a recent interview.

“Putting the 2016-2020 strategic plan in place does not limit the next commissioner’s actions to what were outlined there. Midway, he or she can make changes… At least I won’t be accused of not putting things in place [before the next administration takes over],” Ms. Jacinto-Henares said in a mix of English and Filipino.

Meanwhile, the Philippines has started enforcing a renegotiated double-taxation agreement with Germany. The renewed treaty, which was first signed in 1983, started to take effect on Jan. 1.

The agreement aims to avoid double taxation on capital and various incomes of individuals and corporate entities within the Philippines and Germany.

“The renegotiation lowered certain treaty rates,” Lina Figueroa, tax advisory and compliance principal at Grant Thornton International Ltd. member Punongbayan & Araullo, said in an e-mailed statement.

The renegotiated agreement halved to 5% the maximum tax on dividends paid to German nationals, who hold directly at least 70% of the Philippine-based company’s capital.

The Philippines, meanwhile, may collect 10% of interest raised within its territory. This is lower than the 15% required in the original agreement.

“Interest for sales on credit of a commercial/scientific equipment and an enterprise to enterprise sale on credit, is now taxable only in the residence state of the creditor, and not anymore taxable at 10% in the source state,” Ms. Figueroa noted.

The renegotiated agreement further unified the tax rate for royalties in lieu of the 10%-15% range. Royalties received by a German from the Philippines, for instance, will be subject to a uniform 10% tax.