BIR launches new system to prevent abuse of tax credit certificates

In an effort to prevent the misuse of tax credit certificates (TCCs), the Bureau of Internal Revenue is set to launch a new system that will facilitate and monitor the issuance of such certificates.

A TCC may only be used in the payment of direct internal revenue tax liability such as income tax, documentary stamp tax, excise tax, value-added tax, percentage tax and other internal revenue taxes.

Internal Revenue Commissioner Dakila Fonacier said the new automated program called "Oplan Dagdag Pambayad" is expected to pave the way for a more efficient processing of TCCs and tax debit memos (TDMs).

"Oplan Dagdag Pambayad allows for the speedy review and approval of tax credit claims from taxpayers at a reduced time. It also provides the bureau with the capability to exchange information with external agencies. These benefits serve to improve the bureau’s service to the taxpayers," Fonacier said.

The BIR chief said that aside from the faster processing of TCCs and TDMs, the new capability would contribute to the generation of more revenue as this will reduce unnecessary losses caused by false credit claims, inefficient tracking and TCC misuse.

The new scheme, he said, will demonstrate the BIR’s commitment to move forward in its computerization and modernization efforts by pursuing the automation of functions for a more efficient delivery of taxpayer service.

He said this system is one of the several releases under the Bureau’s Integrated Tax System (ITS), a backbone of the BIR’s ongoing tax computerization program.

Up to now, the BIR is still investigating the P60-billion tax credit scam involving various big oil companies. Fonacier said the tax credit scam probe is part of the massive tax audit campaign launched to collect more than P12-billion additional revenues for the government.

President Estrada ordered the investigation of several oil and garment companies in relation to the alleged misuse of tax credits two years ago. Some personnel at the Department of Finance’s (DOF) one-stop-shop, the DOF office handling the issuance of tax credits, are now being charged at the Office of the Ombudsman.

Up to now, the BIR’s legal office has yet to come up with the list of those companies to be charged for the said tax fraud.

The BIR said that they have been encountering problems in gathering data to go against these firms. Based on the bureau’s investigation, some companies were able to transfer or sell their TCCs to other firms to be used as tax payments.

The BIR has issued new rules to specifically address the misuse of tax credit as a form of avoiding payment of the right taxes.

Under Revenue Regulations No. 5-2000, TCCs should not be used as payments of any kind of withholding tax, deposits on withdrawal of exciseable articles, compromise penalty, taxes not administered or collected by the BIR and those arising from the availment of tax amnesty declared under a legislative enactment.

The new TCC rules said a taxpayer may only transfer his TCC provided that he complies with the required conditions such as the transfer sought must be with the approval of the BIR Commissioner or his duly authorized representatives, to verify the validity of the TCC.

The transfer should be limited to one transfer only and that the transferee shall use the TCC assigned to him strictly in payment of his direct internal revenue tax liability and is not in any case available for conversion to cash.