WITH Manny Pacquiao’s tax evasion case with
the Bureau of Internal Revenue (BIR) still a sizzling topic, the tax
office issued a new revenue regulation that is making waves among
taxpayers, tax practitioners and revenue officers with regard to the due
process requirements in issuing deficiency tax assessments.
The rules governing the issuance of
deficiency tax assessments are long established under Section 228 of the
National Internal Revenue Code of 1997 (Tax Code) and its implementing
regulation, RR No. 12-99. Under the old rules, after the examination of a
taxpayer’s books of accounts and other records pursuant to a Letter of
Authority or a Letter Notice, the BIR officer who performed the audit
shall notify the taxpayer of the discrepancy or discrepancies in the
latter’s tax payments, by issuing a Notice of Informal Conference. The
taxpayer is then given 15 days to present his side of the case.
In case the taxpayer fails to timely respond to the Notice of Informal
Conference, the revenue officer may endorse his findings for the
issuance of a Preliminary Assessment Notice (PAN) or a Formal Letter of
Demand (FLD)/Final Assessment Notice (FAN), whenever the case falls
under the situations enumerated in the Tax Code when a PAN is no longer
required. Again, once a PAN is issued, the taxpayer has 15 days to
refute the findings of the revenue officer.
If the issues are not resolved at the PAN stage, the BIR may issue the
FLD/FAN calling for the payment of the deficiency taxes. The taxpayer is
given 30 days from receipt of the FLD/FAN to submit a written protest
against the assessments, and 60 days from the filing of the written
protest to submit all relevant supporting documents. The taxpayer’s
failure to protest the FLD/FAN or submit all relevant supporting
documents within the prescribed period makes the tax assessments final,
executory and demandable.
If the Commissioner of Internal Revenue or his duly authorized
representative denies the protest, or fails to act on the protest, the
taxpayer may elevate the decision of the Commissioner to the Court of
Tax Appeals (CTA) within 30 days from receipt of the denial or lapse of
the 180-day period for the Commissioner to decide. The taxpayer’s
failure to timely appeal the adverse decision or the inaction of the
Commissioner of Internal Revenue to the CTA makes the assessments final,
executory and demandable.
Revenue Regulations (RR) No. 18-2013, dated Nov. 28, 2013, changed the
pace of the tax assessment and collection process by introducing the
following amendments:
1. Omission of the issuance of the Notice of Informal Conference;
2. Issuance of the FLD/FAN within 15 days from receipt of the PAN, in
case of default by the taxpayer, or within 15 days from filing of the
reply to the PAN, in case of disagreement with the tax findings in the
PAN;
3. Requirement on the part of the taxpayer to state the nature of
protest to the FLD/FAN, whether for request for reconsideration and
request for reinvestigation, and prescribing the legal effects of each
mode;
4. Institution of the administrative appeal with the Commissioner of
Internal Revenue through request for reconsideration, in which the
taxpayer is barred from presenting newly discovered or additional
evidence to support his case;
5. Inclusion of an exclusivity rule in case of inaction of the
Commissioner on the protested assessment, i.e., the remedy of filing a
petition for review with the Court of Tax Appeals bars the remedy of
waiting for the final decision of the Commissioner or his duly
authorized representative, which decision is subject to appeal to the
CTA;
6. Institution of personal service and substituted service as modes of
serving the PAN/FLD/FAN and the Final Decision on Disputed Assessment
(FDDA) in addition to service by registered mail.
The most notable amendment introduced by RR 18-2013 is the removal of
the Notice of Informal Conference. The Notice of Informal Conference is
not a requirement under the Tax Code; nevertheless, it was
institutionalized under RR 12-99 as part of procedural due process. In
scrapping this requirement, the BIR aims to achieve an assessment and
collection process which, in numerous cases decided by the courts, is
defeated by the defense of prescription under the statute of limitations
of the Tax Code.
The BIR seems to be keen on formalizing the tax assessment after the
investigation reaches the PAN stage. It is interesting to note that the
BIR only has 15 days to resolve the issues in the PAN stage and issue
the FLD/FAN. A real evaluation of the documents and arguments of the
documents submitted by the taxpayer takes time and needs more than 15
days. Understanding the documents, tax reconciliations and legal
defenses is impossible to do within a short period of 15 days primarily
because of the huge numbers of tax investigations assigned to revenue
officers. The only way to prevent the issuance of the FLD/FAN is to
settle the tax assessments in the PAN, which would make one wonder why
replying to the PAN is one of a taxpayer’s remedies in the first place.
The shortened period does not give the taxpayers enough time to prepare
his documents and arguments. More importantly, it does not allow the BIR
officers enough time to consider and study the documents and arguments
presented to them.
It would seem that the shortened period, though aimed at expediting the process, however makes the PAN stage inutile.
There are other interesting provisions in RR No. 18-2013 which, in my
opinion, should have been the topic of an open forum between the BIR and
taxpayers, or now that it is issued, be the subject to a clarificatory
issuance by the BIR. This "game changer" will take effect on Dec. 15,
2013, and given its important amendments, it pays to have a proper
understanding of procedural due process as part of a taxpayer’s rights
and remedies under the law.
The author is a tax manager at Punongbayan & Araullo, the Philippine member firm of Grant Thornton International Ltd.
source: Businessworld
No comments:
Post a Comment