For issuing new rules in transition: Henares at loggerheads with tax managers’ group

MANILA, Philippines - Taxmen and the industry are at loggerheads again, this time over two orders which tax managers said should not have been issued during transition, but which the Bureau of Internal Revenue (BIR) chief said she had every power to do so.

At the center are Revenue Memorandum Order (RMO) 24-2016 and Revenue Memorandum Circular (RMC) 62-2016, which BIR commissioner Kim Henares issued two weeks before she steps down by noon of June 30.

Benedict Tugonon, president of Tax Management Association of the Philippines (TMAP) reiterated yesterday he would seek the repeal of both orders during the next administration.

“We will take the opportunity to call the attention of the next administration to the barrage of last-minute revenue circulars recently issued by the BIR, less than 30 days to the start of the new administration,” Tugonon said in a statement.

But Henares blasted Tugonon, saying she was just merely doing her job.

“Why should I restrain myself? I’m still the commissioner of internal revenue and I should do my job,” she said in a phone interview last Friday.

Issued June 7, RMO 24-2016 laid out tax probe rules for property buyers and sellers who will not be able to show financial capacity to hold into their assets. Tugonon earlier said this was “unjust and unfair” for presuming taxpayer fraud as basis for investigation.

He cited the case of overseas Filipino workers, who may not have income tax returns (ITR) as proof, but are otherwise more than able to buy properties.

Henares was quick to debunk this. “Do they not know how to read?” she said.

“The issuance said you execute an affidavit as to what is your source of revenue and show proof. So if they are OFWs, don’t they have a pay slip or contract?” the BIR chief explained.

She added there is nothing wrong with investigating those without proof of financial capacity, pointing to lifestyle checks conducted on government officials.

“Isn’t that what the net worth method is all about? If you have assets and you cannot show proof that you have reported and paid taxes..., there is presumption of tax evasion,” Henares said in a text message.

As if this was not enough, RMC 62-2016 that clarified how banks and non-banks should treat “passed-on” gross receipt taxes (GRT) to their clients was also objected by TMAP.

Under the memo, financial institutions were told that since they are making their clients shoulder GRT on transactions such as loans, they “constructively” gained additional income which should be charged with separate tax.

This is on top of the levy on the interest income for their loans, which Tugonon said makes it effectively “a tax on tax.”

But Henares pointed out she is simply following the law. “Since they pass on the tax they should have been paying, then they are getting reimburse for their cost,” she said.

“GRT is an indirect tax and therefore, if you pass it on, it forms part of the price of goods you are selling... This is a basic principle of taxes,” she added.

Tugonon had also said that as a result of the new memorandum, lenders may resort to passing the cost to their clients through higher interest rates.

To this, the BIR chief had this to say: “If they are really concern about the welfare of the borrowers, then they should not pass on the GRT.”

This was not the first time that Henares drew the ire of taxpayers for her tax issuances. 

In 2013, she drew flak for requiring the reporting of transactions charged with final taxes on the ITR. Henares eventually withdrew the plan.

She also planned to require doctors and lawyers to disclose their rates as part of BIR’s run after self-employed individuals. The Supreme Court invalidated the order in 2014. 

Asked if she is concerned that her new orders may be questioned or reversed by her successor, Cesar Dulay, Henares said “it’s up to him.”

Tugonon, for his part, said he would push for tax reform during the workshop between businessmen and incoming Duterte administration’s economic managers beginning tomorrow.

“The consultation meeting…is in stark contrast to the practice of the current BIR commissioner of releasing revenue issuances without conducting consultation…,” he said.