How VAST’s invoicing requirements would differ from present VAT law

To the objection that VAST system would be easy to cheat in because collecting would not be as transparent as in the present VAT system, House of Representatives Ways & Means Chairman Hermilando Mandanas points to the accounting and invoicing requirements under his proposed law. These requirements are more rigorous but simpler to implement and easier for the government to test and verify than in the present law, he told The Times.

Mandanas also points that companies will be required to submit a quarterly return of their gross sales and pay their VAST monthly.

These are the relevant provisions of HB 1970 concerning returns:

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SECTION 9. Section 114 of the Code is hereby amended to read as follows: “SEC. 114. Return and Payment of [Value-Added] VALUE SIMPLIFIED Tax. –

“(A) In General. – Every person liable to pay the [value-added] VALUE SIMPLIFIED tax imposed under this Title shall file a quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each taxable quarter prescribed for each taxpayer: Provided, however,
That [VAT] VAST-registered persons shall pay the value-added tax on a monthly basis.

“Any person, whose registration has been cancelled in accordance with Section 236, shall file a return and pay the tax due thereon witiiin twenty-five days from the date of cancellation of registration: Provided, That orily one consolidated return shall be filed by the taxpayer for his principal place of business or head office and all branches.

“(B) Where to File the Return and Pay the Tax. – Except as the Commissioner otherwise permits, the return shall be filed with and the tax paid to an authorized agent bank, Revenue Collection Officer or duly authorized city or municipal Treasurer in the Philippines located within the revenue district where the taxpayer is registered or required to register.

“(C) Withholding of [Value-Added] VALUE SIMPLIFIED Tax. – The Government or any of its political subdivisions, instrumentalities or agencies, including government-owned or -controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods and services which are subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold a final value-added tax at the rate of [5 percent (5%)] 3 percent (3%) of the gross payment thereof: [Provided, That the payment for lease or use of properties or property rights to nonresident owners shall be subject to ten percent withholding tax at the time of payment. For purposes of this Section, the payor or person in control of the payment shall be considered as the withholding agent.]

“The [value-added] VALUE SIMPLIFIED tax withheld under this Section shall be remitted within ten (10) days following the end of the month the withholding was made.”

VAT-dodging foreign companies
Cases of VAT-doding by foreign companies will also be more easily detected, Mandanas said.

He cited the case of a Japanese company manufacturing TV components and screens, which the Bureau of Internal Revenue charged with tax evasion earlier this year.

The company, which operates at the Clark Special Economic Zone, was accused by the BIR of not paying VAT taxes and not remitting withholding taxes to the tune of more than P280 million.

Last week, the BIR filed before the Department of Justice tax evasion complaints against two companies, including the subsidiary of a China construction firm blacklisted by the World Bank for allegedly rigging bids for road construction projects.

One company had failed to pay some P700 million in taxes due and had allegedly fraudulently used tax credits issued to its parent company to escape VAT payments.

The other company had also fiddled with VAT payments deductions. –Manila Times