BIR issues guidelines to stop tax cheats

MANILA, Philippines - The Bureau of Internal Revenue (BIR) has laid down guidelines on deducting expenses and reporting income to stop tax cheats.         

Finance Secretary Cesar Purisima said the new guidelines are in line with the BIR’s goal of improving revenue collection.       

The guidelines cover deposits and advances made by general professional partnerships such as accountants, consultancy firms, law firms, and other taxpayers.

Purisima expressed hope the new guidelines will put an end to taxpayers’ practice of using out-of-pocket expenses to avoid paying taxes.

“Businesses, professionals, and self-employed individuals usually deduct expenses and record income illegitimately. Now, we will not let them use out-of-pocket expenses as a way to cheat on their taxes,” he said.

The new rule provides that when a general partnership or taxpayer receives a deposit or advance from a client, the taxpayer is required to immediately issue an official receipt for such payment. The amount received will be recorded as income and subject to value-added tax or percentage tax.

The client who made the payment may deduct the same as an expense provided an official receipt was issued in the client’s name.

The new guidelines also provide that a client making a deposit or advance should withhold the expanded withholding tax and remit these within the prescribed period.

“If we can improve compliance through guidelines like these, we can raise our revenue collection without raising tax rates,” Purisima said.

The BIR aims to boost collection from income taxes to P258 billion this year.

The bureau noted high incidence of tax evasion among professionals and self-employed businessmen.

Data from the Professional Regulation Commission showed there are around three million registered professionals in the country.