Still on the new income tax returns

When the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 28-2014 last April 16, 2014, it was a confirmation of the answer stated in the “frequently asked questions” page found on the Electronic Filing and Payment System (eFPS) overview webpage: 

“No penalty will be charged to you for late e-filing, if during deadlines the eFPS was unavailable as announced through a Revenue Memorandum Circular/Advisory on Systems Unavailability.”

This brings me to evaluate my own experience with filing the new tax returns. What happened during April 15, 2014 with your own tax filing?  Even before the 15th I was at a Revenue District Office (RDO) on a Saturday, discussing issues with the chief of the assessment section, and also of the collection section while their teams were hard at work. 

Sometime on the 15th, the number of taxpayers logged into the eFPS peaked at a little over 5,000 users.  Then taxpayers began to experience difficulty in using the eFPS.  I had seen taxpayers begin to troop to their respective RDOs, some with laptops, requesting BIR personnel for help in logging into the eFPS.  Some regions allowed their e-Lounges to be used, either through the available desktops, or through the taxpayers’ laptops, connecting through wifi or with LAN cables.  I know of some taxpayers that abandoned the eFPS altogether, opting to file manually, which were accommodated by most RDOs. 

Yet others continued to access the eFPS from their respective offices, finally getting through during the early morning hours of April 16.  Of course, when RMC No. 28-2014 was officially released at around 1:20 pm, eFPS taxpayers who had yet to file their ITRs and pay the income taxes due redoubled their efforts to access the eFPS, or to file manually, at least without the thought of how to address a 25 percent surcharge plus interest and compromise penalties for late payment.

The new income tax returns (ITRs), versions June 2013 were effectively tested that day for the first time through manual and electronic filing.  Maybe this contributed to the “downtime” experienced by a number of taxpayers who tried to use the eFPS.

Clearly, more taxpayers chose to file during the deadline because up to that point, certain questions and issues were still being raised as to how to fill up the new ITRs.  Some data previously required under the last enhanced ITRs (version November 2011) were no longer required, while other new information requirements were introduced in the latest ITRs.  Some questions were answered through the BIR hotline, such as the need to add a “0” to the required accreditation number of the external auditor.  Other questions required consultation and re-consultation with the relevant BIR personnel.  Questions like who are the stockholders of a Philippine branch (of a foreign corporation), or how to resolve the requirement of capital contributions exceeding 100 percent, since the ITRs would not accept decimal points on a per stockholder field. Or the question on what is the acceptable “grouping” of balance sheet accounts to be indicated in the ITRs.  Even before the eFPS would accept the filing of the new ITRs, these questions had to be addressed.

Following that, all the new data had to be accepted and processed through the existing eFPS.  True, a taxpayer would still have to fill out just one ITR, but depending on which ITR that was (RT/EX/MX), several new data fields were required to be filled, which accounted for more information to be processed.  Imagine the information coming from a taxpayer with more than 20 lines of business filling out required fields in BIR Form No. 1702 MX.  And the more information required to be processed, the more work will be required of the eFPS.

Add these issues to the usual taxpayers’ concerns regarding cash flow, internal clearances for payment, availability of signatories to authorize payments, and it is easy to understand why there were more eFPS filers during the deadline. 

The BIR did its job of informing the public by conducting numerous lectures on how to fill up the new ITRs.  We were fortunate enough to have a BIR official and her staff to provide a briefing on not just how to fill up the new ITRs, but likewise on why certain data was now being required. 

I tip my hat off to these individuals, some of whom, despite personal tragedies, were in the thick of the action as it were on April 15. 

But the real test on how to fill out these new forms would only come when all types of taxpayers actually attempted to fill out, and file these new forms.  And that’s when more questions arose as situations particular to specific taxpayers became apparent. Given the number of taxpayers in the Philippines, there is bound to be a taxpayer or even more with particular circumstances that were not thought of, or considered, when the required information was included as necessary in the new ITRs.  And with more information required, paired with the penalties for failure to provide accurate information, taxpayers will try to consult as best as they can, to mitigate, if not avoid the risk of providing wrong information in the new ITRs.

Note that I haven’t gone into the issue of the capacity of the eFPS from a technical viewpoint, since I am definitely not an IT expert or specialist.  Rather, these are my thoughts based on my first hand experience with the ITR filing deadline.

Whatever the reason for filing their ITRs on the last day, the fact is that taxpayers sought to comply with the requirements of the BIR.  The enhancement of the BIR forms is seen as necessary to provide information which help in the better administration of taxes.  Hence, most will agree that making compliance easier, and involving the taxpayers in the process of enhancing the major BIR forms, will be a positive step towards tax reforms.

Taxpayers will appreciate having the new forms released and questions addressed months before the filing deadlines.  This way taxpayers may have time to fully understand the information required by the new forms, and consult on, if necessary, on unclear requirements. Given the even stricter interpretations of tax laws, rules and regulations already in place, it would be more than acceptable to make compliance with these requirements as painless as possible. We believe in the catch phrase of BIR’s media campaign stating that  “it’s as easy as RFP”.  Easy filing necessarily includes easy filling out of the BIR forms.

Finally, still on the issue of new forms, did you know that the BIR is currently working on amending/enhancing BIR forms Nos. 0605, 2250M, and 2250Q?  The new forms may be released this year.

Andrew James Gerard Dulay Ruiz is a senior manager from the tax group of R.G. Manabat & Co. (RGM&Co.), the Philippine member firm of KPMG International.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or RGM&Co. For comments or inquiries, please email [email protected] or [email protected].

For more information on KPMG in the Philippines, you may visit www.kpmg.com.ph.