LGUs urged to adopt digital tools to improve services, revenue generation

Robie de Guzman   •   October 6, 2020   •   259

MANILA, Philippines – The Department of Finance (DOF) on Tuesday called on local government units (LGU) to switch to digital technologies to vastly improve the delivery of frontline service and to generate more revenues.

In a statement, Finance Secretary Carlos Dominguez III said LGUs should also start working with the national government in preparing for the seamless transfer to their offices of the additional devolved functions, services, and facilities that they would have to assume with the implementation of the Supreme Court’s ruling for an expanded internal revenue allotment (IRA) share of LGUs.

The high court’s ruling on the LGUs IRA share will be implemented starting 2022.

Citing the Supreme Court’s Mandanas doctrine, the DOF said that the IRA share of LGUs should come from all national taxes, as mandated under the 1991 Local Government Code, and not from just the taxes collected by the Bureau of Internal Revenue (BIR) within the respective jurisdictions of LGUs.

This expanded revenue coverage means the IRA share of LGUs should also include other taxes such as those collected by the Bureau of Customs (BOC), the department said.

Dominguez said this sizable IRA increase for LGUs will let them pump-prime their respective local economies in the “new economy.”

“As we anticipate a new economy in the post-pandemic era, we strongly encourage our LGUs to adopt digital technologies to efficiently deliver frontline services,” he said.

“This should include the processing of business registration and the collection of local taxes. Investments in information technology will not only make for more responsive governance, it will improve revenue generation of our LGUs,” he added.

He also said that with the end of the public health emergency triggered by the pandemic’s remaining uncertain, the government should “continuously build up its fiscal resilience by optimizing the revenue generation capacity at both the local and national levels, and improving tax administration.”

The Finance chief likewise expressed confidence in the country’s ability to regain its growth momentum by next year with the help of several fiscally responsible economic stimulus measures.

“We remain confident that we will win back our growth momentum by next year. A lot will depend on whether we can revive consumer confidence and domestic demand,” Dominguez said.

“Let us work hand in hand to beat this pandemic. We have a future to win,” he added.

BIR collects over P500-M in taxes from padlocked establishments – DOF

Robie de Guzman   •   December 2, 2020

MANILA, Philippines – The Bureau of Internal Revenue (BIR) has collected a total of P547.9 million in taxes from January to September this year from 178 commercial establishments that were padlocked earlier for failing to either register or pay the correct amount of taxes, the Department of Finance (DOF) said Wednesday.

In a statement, the DOF said BIR’s operations conducted against the padlocked establishments were pursuant to Revenue Memorandum Order (RMO) No. 3-2009, otherwise known as the “Oplan Kandado Program.”

In a report to Finance Secretary Carlos Dominguez III, the BIR said it has also filed 14 cases before the Court of Tax Appeals (CTA) in a bid to collect some P338 million in tax liabilities from various respondents.

Meanwhile, 72 complaints involving an estimated P3.4 billion in tax liabilities that the bureau has filed before the Department of Justice (DOJ) are now under preliminary investigation, BIR Deputy Commissioner Arnel Guballa said in his report.

Last year, the BIR collected a total of P1.92 billion under its Oplan Kandado program as a result of the temporary closure of 743 establishments for various violations of the National Internal Revenue Code.

BIR’s performance under the Oplan Kandado program in 2019 was a 218.88-percent improvement over its 233 closures of establishments reported in 2018 and a 140.76-percent increase in collections amounting to P799.47 million during that year.

Also in 2019, the BIR filed a total of 347 complaints involving tax liabilities estimated to be worth P24.02 billion combined before either the DOJ or CTA as part of the Duterte administration’s all-out campaign against tax evaders.

Under its Run After Tax Evaders (RATE) program, 309 cases for preliminary investigation were filed by the bureau before the DOJ last year for tax liabilities of various individuals and corporations estimated at P19.06 billion combined.

The DOF said this was a marked improvement of 56.85 percent over the 197 cases filed by the BIR in 2018 involving some P15 billion-worth of tax liabilities.

In the CTA, the bureau has filed 38 cases for tax liabilities worth P4.94 billion combined, or more than triple the 12 cases filed before the tax appeals court in 2018.

The cases filed before the CTA involving close to P5 billion in tax liabilities represent a 480.67 percent increase over the estimated P851.57 million in taxes that the BIR had hoped to collect in 2018 through litigation, the DOF said.

Trust fund for college education of children from poor families eyed – DOF

Robie de Guzman   •   November 17, 2020

MANILA, Philippines – The Capital Market Development Council (CMDC) is studying the possibility of creating a child trust fund that would support the tertiary education of children from qualified poor families, the Department of Finance (DOF) said Tuesday.

The DOF said the proposal eyes sourcing the fund from the national and local government units’ contribution. The trust fund will be managed by financial institutions.

“The fund can also either be managed by the government and a part of it can also be cut out to be managed by the private sector,” said National Treasurer Rosalia de Leon, who also acts as treasurer of the CMDC.

“We are still on an exploratory stage and we would like to further do a more detailed or granular study on the CTF and to sell it to the Council in the coming meetings,” she added.

The proceeds from the child trust fund can also be used for daily allowances, transportation expenses, board and lodging and other miscellaneous expenses of public school students.

De Leon said the concept was adopted from the child trust funds implemented in the United Kingdom and Singapore.

In the UK, more than six million child trust fund tax-free accounts were set up to prepare for future educational expenses or for any other purpose that would benefit children born between Sept. 1, 2002 and Jan. 2, 2011.

An initial seed money of 250 or 500 British pounds per child was provided by the UK government and the accumulated amount can be withdrawn once the children reach 18 years of age.

Meanwhile, in Singapore, the government contributes a total of 4,000 Singapore dollars over ten schooling years of primary and secondary education of each child-beneficiary under its Edusave Scheme, which automatically covers all 7-year old Singaporeans.

With no withdrawal restrictions, the beneficiaries can take out money from their accounts even before their maturity, provided that they use the proceeds for educational purposes. The government closes each account and transfers the unused fund balance once the child-beneficiary reaches 16 years of age.

Aside from providing an education fund for poor families’ children, the child trust fund also aims to revive the “savings culture” in the country, according to Consuelo Garcia, Liaison Director for Capital Markets of FINEX.

“It is actually to be the missing link to what we have right now. The PERA (Personal Equity and Retirement Account (PERA) is for the working class. This one is for the young people. The baby boomers already got left behind so I think we could have this as a starting point,” she said.

De Leon noted that a survey done by the Philippine Statistics Authority (PSA) in 2017 showed that around 18 percent of out-of-school youths have cited financial woes as their main hindrance to getting an education, despite a conditional cash transfer program being implemented by the government.

She said the CTF will provide a solution to one of the hindrances to the country’s commitments to the United Nations’ Sustainable Development Goals (SDGs), of which the fourth one is Quality Education.

Deadline of tax payments, other charges imposed by LGUs extended – DOF

Robie de Guzman   •   November 10, 2020

MANILA, Philippines – The Department of Finance (DOF) on Tuesday said it has extended to Dec. 19 the payment of all local taxes, fees, and charges imposed by local government units with deadlines falling on or after Sept. 14 this year.

In a statement, the DOF said the move is in compliance with the provisions of Republic Act 11494 or the Bayanihan to Recover as One Act (Bayanihan 2).

Under Department Circular No. 003-2020 issued by Finance Secretary Carlos Dominguez III, the counting of the period within which to pay local taxes, fees and charges are also suspended until Dec. 19, 2020, including the period for the redemption of real properties sold or forfeited at public auction.

“In the event that an LGU had already extended the deadlines prior to the effectivity of RA 11494, such deadlines, if earlier than 19 December 2020, shall be deemed modified with the period set forth herein. Any further extension of deadlines beyond 19 December 2020 shall be authorized in accordance with the provision of RA No. 7160,” the circular stated.

RA 7160 is the Local Government Code.

As a result of the mandatory extension of these payment limits, no interest, surcharge or any form of penalty shall be applied on any local tax, fee or charge accruing on or due and demandable during the period covering such deadlines, the circular added.

As for local tax delinquencies prior to the effectivity of Bayanihan 2 on Sept. 15, the DOF said all payments shall be due and demandable upon the expiration of the Dec. 19 deadline.

All applicable interests, penalties and surcharges will begin to run again, if due and demandable, after the lapse of the effectivity of Bayanihan 2 on Dec. 19, it added.

The department said Dominguez issued the circular to “provide guidelines on the uniform implementation by LGUs of Section 4 (tt) of the Bayanihan 2 Law, which provides for stretching the statutory deadlines and timelines for the filing and submission of any document, the payment of taxes, fees and other charges required by law, and the grant of any benefit.

This provision under Bayanihan 2 aims to ease the burden on individuals and enterprises affected by the severe disruption of economic activities resulting from the stringent community quarantines that the national and local governments have imposed to curb the spread of COVID-19.

The circular also directs local treasurers to coordinate with LGU officials to actively inform taxpayers of these mandatory extensions, and to reconfigure the electronic information systems used by local governments for the assessment and computation of such local taxes, fees and charges covered by the circular.

Local treasurers were also ordered to defer activities related to administrative or judicial action for the enforcement and/or collection of local taxes, fees or charges until the lapse of the effectivity of the Bayanihan 2 Law.

They were likewise directed to enable the use of electronic or non-face-to-face payment facilities so that taxpayers who will still opt to pay early may be continuously accommodated by the LGU to ensure physical distancing.

The DOF also ordered LGU treasurers to advise their respective local chief executives on matters concerning the grant of further incentives and/or privileges to taxpayers and business establishments, particularly those extending assistance and providing essential services for COVID-19 response.

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