Business groups press withdrawal of BIR income info circular

Six major business organizations have supported moves by a House body calling for the withdrawal of the controversial Revenue Memorandum Circular 40-2011 issued last September 5 by the Bureau of Internal Revenue (BIR), requiring the disclosure of additional detailed income information of taxpayers.

In a joint position paper submitted to the House Committee on Ways and Means, the Philippine Chamber of Commerce and Industry (PCCI), Tax Management Association of the Philippines (TMAP), Management Association of the Philippines (MAP), Employers Confederation of the Philippines (ECOP), Philippine Exporters Confederation, Inc. (PHILEXPORT), and Financial Executives Institute of the Philippines (FINEX) conveyed their concern on RMC 40-2011 which requires the submission of a Supplemental Information Return (SIR) as part of the annual income tax returns of taxpayers.

According to the House of Representatives Web site, the committee chaired by Batangas Rep. Hermilando Mandanas has been conducting hearings on RMC 40-2011 on the basis of a letter of Valenzuela Rep. Magtanggol Gunigundo dated October 21 which states that there is no legal basis for RMC 40-2011 to stand since law is needed to carry out what the BIR wants under this new memorandum circular.

Gunigundo said RMC 40-2011 basically implements the Annual Information Return (AIR) that mandates list up of passive income of taxpayers under Revenue Regulations 2-2011 that was already suspended last March by Finance Secretary Cesar Purisima, through the efforts of the House Committee on Ways and Means, by Revenue Regulation 6-2011.

The joint position paper was signed by PCCI President Francis Chua, TMAP President Atty. Agnes Le. Casabar Oxales, MAP President Architect Felino Palafox, Jr., ECOP President Edgardo Lacson, PHILEXPORT President Sergio Ortiz-Luis, Jr., and FINEX President Ronnie Alcantara.

The group objected to RMC 40-2011 because its requirement to file ITRs with SIR contravenes the provision of Section 51(A)(2) of the Tax Code which provides that the following individuals shall not be required to file an income tax return : (b)an individual with respect to pure compensation income, as defined in Section 32 (A)(1), the income tax on which has been correctly withheld under the provisions of Section 79 of the Tax Code; and (c) an individual whose sole income has been subjected to final withholding tax pursuant to Section 57(A) of the Tax Code.

Based on these provisions, the position paper cited it is clear that an individual whose compensation income has been correctly subjected to withholding tax regardless of amount or whose sole income has been subjected to final withholding tax is not required to file an ITR. On the contrary, RMC 40-2011 requires such individuals with a certain level of income or of final withholding tax to file an ITR with SIR.

The position paper cited RMC 40-2011 also contravenes Section 51(A)(3) of the Tax Code which provides “The forgoing notwithstanding, any individual not required to file an income tax return may nevertheless be required to file an information return pursuant to rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner.”

“The SIR imposed by RMC 40-2011, which was approved solely by the BIR Commissioner, is not a valid requirement since it is not based on any rules and regulations prescribed by the Secretary of Finance,” cited the joint position paper.

In brief, the joint position paper said RMC 40-2011 has no legal basis and is even contrary to all the aforecited provisions of the Tax Code.

The joint position paper also criticized the SIR as a redundant requirement which imposes an additional burden to taxpayers but which will not necessarily add to the BIR tax collections. Moreover, its said erroneous declarations in the SIR could expose the taxpayer to penalties of perjury as in any tax return submission to the BIR.

The needed income information is already available in the BIR and can be culled from the reports submitted by the income payors or from the tax returns already filed by the taxpayers themselves with the BIR, for instance capital gains tax returns according to the joint position paper.

Lastly, the joint position paper said while on surface, the reporting requirement seems easy to comply with, in reality, it is difficult to implement considering the nature and details of information required to be reported.

For instance, getting such detailed information from the banks will take time given the number of bank customers and the volume of transactions involved. “Gathering and summarizing all the required details on the other passive income items is also a tedious process,” it cited.

It noted that one of the attractions for choosing investments with tax free or net of tax yields is the exemption from the hassle of accounting for and reporting of income received from such investments. The requirement to account for and report such income negates that advantage, stressed the joint position paper. –Daily Tribune