Philippine BIR to benchmark tax compliance

In Australia, the Australian Taxation Office (ATO) uses benchmarking tools to ensure the right taxes are paid by businesses. Doing the same in the Philippines will yield the same benefits.

From BusinessWorld Philippines

27 October 2011

By Diane Claire J. Jiao

THE BUREAU of Internal Revenue (BIR) has launched a benchmarking system to better measure tax compliance among various sectors and increase revenue collections.

BIR will compile all information from financial statements submitted by companies to determine average sales, income and tax liabilities of each industry, Commissioner Kim S. Jacinto-Henares said in a phone interview on Wednesday.

Averages will be used as bechmarks for a particular sector.

Should a taxpayer of that group fall below the standard, BIR will audit that person or company first.

“The system was initially used mainly by our Large Taxpayer Service; but now, they will be used by all field offices of the BIR,” Ms. Henares said.

“We will set benchmarks for as many sectors as possible so we can cover most taxpayers,” she added.

The system is expected to help the bureau detect tax leakages and improve collections on income and value-added taxes.

It will also plug loopholes in tax collection and increase voluntary compliance, a statement released yesterday said.

Such loopholes have cost the bureau roughly P218 billion per year, project proponent and BIR Makati City Regional Director Nestor S. Valeroso said in the statement.

Increasing revenue collections through this approach is also in line with the Aquino administration‘s no-new tax policy, he added.

Under the project, taxpayers found to be below industry benchmarks will be issued a Benchmarking Letter Notice.

Such taxpayers will be given a chance to amend their tax returns.

They can also respond to the notice by showing proof to rebut findings of the BIR.

The tax bureau is currently rolling out the benchmarking project nationwide through a series of regional road shows.

Each BIR revenue district office will be tasked to formulate benchmarks for each sector or industry within its area of jurisdiction.

The benchmarking system should be fully ready for implementation before the end of the year, Ms. Jacinto-Henares said.

BIR is the government’s main revenue-collecting agency, responsible for 70% of state revenues. Tasked to collect P940 billion this year, its outlook was recently trimmed to only P935.5 billion given the country’s slower-than-expected economic growth.

The bureau had so far collected P686.26 billion as of September. It must collect P249.24 billion this quarter to meet that outlook or P253.74 billion to meet its full-year goal.

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