The government of the Philippines is initiating a new project to ensure that small business owners and stall operators across the country are complying with their tax obligations. The new initiative was revealed by Commissioner of the Bureau of Internal Revenue (BIR) Kim Jacinto Henares while speaking at a press conference on January 29th.

Under the new regulations BIR investigators will be tasked with carrying out “tax mapping” operations across public markets in the Philippines, predominantly to ensure that all small businesses issue official receipts and record their sales.

The BIR agents taking part in the operations will be granted powers to inspect business premises, to investigate the accounts and records of the businesses, and to monitor the operators to see if receipts are being issued. Further, the inspectors will provide stall owners with official BIR materials, which must be displayed in the business premise to encourage taxpayers to meet their obligations.

In order to prevent abuse, the “tax mapping” will be restricted to small markets, and all BIR agents will be required to obtain and hold an official BIR investigation order before commencing any inspections.

Any business found to be breaching its filing or tax requirements can be fined PHP 2 000 for a first time offense, and if subsequent breaches occur, the business could be closed down and criminal charges against the business owner could be raised.

Photo by Nina Matthews Photography

Following a Cabinet meeting over the weekend the Finance Secretary of the Philippines Cesar Purisima said to members of the press that the national tax authorities are currently investigating the feasibility of applying on country’s mining industry a new taxes on carbon emissions and the use of mineral resources.

The Finance Department of the Philippines is investigating a proposal made by Environment Department to see all of the country’s mining sites reclassified as mineral deposits, allowing the government to collect a new 5 royalty tax on profits earned. Under current regulations, mining operators are faced with a 2 percent excise tax on their profits, along with the regular taxes levied on businesses operating in the Philippines. The government is also looking at instituting a carbon tax system, which would see the country’s top polluters charged a preset levy, which will be calculated per ton of pollutants released into the atmosphere.

According to Cesar Purisima, the government is monitoring the development of similar tax measures around the world, and especially in Australia. He explained that if the taxes seem applicable to the economic and business situation in the Philippines, they will be added as soon as possible. However, the Secretary conceded that the measures could still be years off, as any new taxes would be required to be legislated by the national Congress.

The mining industry has already stood up against the prospect of new taxes being implemented, claiming that the government already receives a fair share from the revenues of mining operators. Rocky Dimaculangan, vice-president for communications of the Chamber of Mines of the Philippines, suggested that instead implementing new taxes, the government should focus on improving tax collections and compliance of small mine operators, and reducing the occurrence of illegal mining operations.

Photo by World Economic Forum

On October 17th the eight largest banks of the Philippines submitted a petition to the country’s Supreme Court over a recent ruling which, if passed, will see taxes imposed on interest earned from government Poverty Eradication and Alleviation Certificates (PEACe).

The PEACe bonds were issued in 2001, and are set to mature on October 18th. The instruments were originally aimed at raising funds for economic and social projects for the purpose at poverty reduction projects and the development of national welfare infrastructures. On October 7th the Bureau of Internal Revenue (BIR) released a new ruling stating that the PEACe bonds would be subject to a 20 percent withholding tax at maturity.

The banks claim that at the time that the bonds were created the government assured investors that incomes derived from the instruments would be exempt from the standard 20 percent withholding tax on bond incomes. According to the banks, the bondholders were only given 11 days notice regarding the implementation of the new tax, despite having held the bonds for almost 10 years.

The government was set to pay out PHP 35 billion to PEACe bond holders, with approximately PHP 24.3 billion consisting of interest. However, under the BIR’s ruling approximately PHP 5 billion of withholding tax would be deducted from the total payments.

The banks asserted that the newly imposed tax “amounts to an oppressive and arbitrary confiscation of the property of the bondholders…” They claimed further that the tax ruling will be very damaging to the credibility of the current Philippines government, and will serve to erode investors’ confidence in the current administration.

Photo by Maerks

The newly published reports outlined the results of assessments of the legal frameworks for the transparency and the exchange of tax information in Hungary, the Philippines, Singapore, and Switzerland. Five additional reports were also released on the current practice of implementation of international tax exchange information in the Isle of Man, Italy, France, New Zealand and the USA.

In the report on Switzerland it was noted that over the last two years the government of the country has had a significant change in its attitude and toward tax information exchange, and rapid progress has been made to bring national rules in line with internationally agreed standards. However, it was noted that several of the country’s currently signed exchange agreements are still below modern standards and need to be reviewed, and will be reassessed by the Forum in a subsequent peer review in the second half of 2012.

In their respective reviews, the Philippines and Singapore were regarded as having made significant process to meeting international standards, but were deemed as being deficient in the number of international agreements that they hold, with the Global Forum stating that not all relevant international partners are covered in the currently signed network of agreements.
Hungary was seen as having several deficiencies, most notably a lack of information provided about partnerships and companies registered in the country. Hungary’s next peer review is scheduled for early 2014.

The separate peer reviews of Italy, the United States, and France, all noted that each country already has an extensive network of tax information exchange agreements, covering most of their major trading and economic partners. It was also noted that the international standards of tax information exchange are being adequately met. However, all three countries were recommended to investigate methods to speed up response times to requests for information from their international partners.

The review of the Isle of Man praised the country’s network of singed information exchange treaties, but suggested that improvements could be made to the availability of accounting information on limited partnerships. The review of New Zealand found that the country follows acceptable standards of information exchange, but there were some shortfalls in the reporting of accounting records and information regarding the beneficial owners of of liquidated companies.

Photo by The Life of Bryan

The House of Representatives of the Philippines is one step closer to instating a new green tax measure, after having approved the first reading of a new bill which would see a 30 percent decrease in the factory price of eco-friendly automobiles.

The new draft bill would lower the commodity tax rate faced by car manufacturers, for the next five years, on completed eco-automobiles by approximately PHP 25 000 per vehicle. According to the Minister of Finance Lee Sush-der, the tax change will result in local car manufacturers producing greater numbers of LPG powered environmentally-friendly cars. The lowered prices are expected to rapidly sway consumer preferences and encourage a greater uptake of low-pollution car models. The Minister said that any such changes in consumer or producer behavior will perfectly compliment the government’s energy conservation strategy and national pollution reduction plan.

The bill must face two more legislative readings before it is passed, but the Finance Minister suggested that the process is expected to go smoothly, with no strong opposition to the bill. If enacted into law, the new tax measure is expected to generate consumer demand for an additional 5 200 LPG vehicles over the next five years. It is estimated that the tax cut will reduce government revenues the government PHP 136.5 million over the same time period.

Photo by Mr. T in DC