Philippines eyes to create electronic data linkages between BIR and businesses for VAT collection

The measure will help in the early detection of misdeclaration done by unscrupulous taxpayers, thereby reducing or removing errors in the reporting of sales and purchases.

By Adrian M. Reodique
Jan. 11, 2017


The Philippines' House Committee on Ways and Means has passed a bill, which aims to increase government's collection of value added tax (VAT) by creating an electronic data information interconnectivity between the Bureau of Internal Revenue (BIR) and businesses using cash-register machines (CRM) and/or point-of-sales (POS) machines.

House Bill 4601 was authored by Committee Chairman Rep. Dakila Carlo E. Qua (Lone District of Quirino). He said the bill also seeks to remove compliance requirements, and promote transparency in businesses with bulk transactions.

"If enacted into law, the measure will greatly help in the early detection of misdeclaration done by unscrupulous taxpayers, thereby reducing or removing errors in the reporting of sales and purchases. Mandating interconnection between the BIR and appropriate government agencies will provide BIR with third party information, easier VAT refund mechanism and data collection, all of which could be used in plugging leakages and overall efficiency of tax administration," said Qua in a press release by the House of Representatives last Wednesday (4 January 2017).

In line, Cesar Vinuya, Project Manager of the Department of Information and Communications Technology (DICT), said they are now putting up the necessary infrastructure that would create electronic linkages among the government agencies. They also aim to replicate the system in the business sector.

Meanwhile, Rep. Manuel F. Subiri (3rd District of Bukidon) underscored during the hearing the need to address concerns on connectivity, compatibility, and financial costs that will affect the implementation of the proposed law.

Overview of the bill

Under the house bill, BIR is mandated to create an electronic system to link the sales and purchased data on the CRM/POS machines of VAT-registered taxpayers with their servers to report these data simultaneously.

The data processing of sales and purchase will also need to comply with the provisions of the Data Privacy Act.

If approved, the BIR will also need to establish interconnectivity with other government agencies including Bureau of Customers (BOC), Land Transportation Office, Department of Trade and Industry (DTI), Department of Agriculture (DA), Securities and Exchange Commission, and other appropriate government agencies, within one year and six months after the enactment of the act.

In addition, VAT-registered taxpayers who would fail to link their CRM/POS machines to the BIR servers will be penalised half of one percent of their annual net income for the second year preceding the current taxable year for each day of violation.

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