By: Dezan Shira & Associates
Over the past year, the Philippines has been making great strides in improving its business environment. Chief among these improvements has been the government’s efforts to simplify the country’s tax system. While the initial steps in this area have met with some success, there have been calls from within and outside of the government to further improve the tax system.
In February of this year, in order to make filing tax returns simpler and encourage more tax compliance from taxpayers, the Philippines’ Bureau of Internal Revenue (BIR) announced that it had expanded the number of taxpayers who must now use e-filing to pay their taxes. Taxpayers will now have to enroll, file returns, and pay taxes early using the BIR Electronic Filing and Payment (eFPS) System or use electronic BIR Forms (eBIRforms).
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The Philippines is attempting to bring the time it takes for taxpayers to complete their tax obligations down to levels seen in Malaysia (133 hours), Brunei (93 hours), and Singapore (82 hours). It currently takes an average of 193 hours to comply with all tax obligations in the Philippines. The government also wants to reduce the number of payments required.
However, problems have surfaced with the new e-filing system, these have included technical problems on the BIR website and poor training of BIR officials who have been tasked with helping taxpayers navigate the tax system. Additionally, the tax system is still very much a “one-size fits all" model, meaning that there is little difference in the tax requirements for millionaires and those for poor people.
Sonny Angara, the Chairman of the Senate Ways and Means Committee is leading the calls for further simplification of the country’s tax system. In a recent interview, the Chairman stated “While we laud the efforts of the BIR to make taxation more transparent and efficient by implementing the electronic filing and payment system, it seems that many still find the new system more cumbersome and costly with the extra steps they have to take to file and pay their annual income tax."
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Angara has recommended minimizing the number of steps and requirements involved in the tax filing and payment process. He has also suggested reducing the number of forms and fees associated with the process. Angara hopes that these changes will help to further increase tax compliance, widen the country’s tax base, and increase revenue collection.
This article was first published on ASEAN Briefing.
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and emerging ASEAN, we are your reliable partner for business expansion in this region and beyond.
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