INTERNATIONAL TAX DIALOGUE (ITD) ASIA CONFERENCE The Peninsula Hotel, Makati City March 3, 2010

1. INTERNATIONAL TAX DIALOGUE(ITD) ASIA CONFERENCEThe Peninsula Hotel, Makati CityMarch 3, 2010 STRATEGIES FOR WIDENING THE TAX NET - Ways to Promote/Enforce the Registration of Hidden Taxpayers By: NESTOR S. VALEROSO OIC – Assistant Commissioner Large Taxpayers Service – Regular Bureau of Internal Revenue, Philippines

2. REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE BACKGROUND: Two (2) Taxing Authorities : • Local government under the Local Government Code, RA 7160, and • National government under the National Internal Revenue Code, RA 8424 as amended. Slide 2

3. REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE Government Documents as Prerequisite for Business Registration at the Bureau of Internal Revenue • For Single Proprietorship • - Certificate of registration of business name with the Department of Trade and Industry (DTI) • For Corporation • - Securities and Exchange Commission (SEC) Registration Certificate Slide 3

4. REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE MSE Issues • Many Micro and Small Entrepreneurs or Single Proprietorships go into business without the formalities of registration. Slide 4

5. REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE Strategies to Promote/Enforce the Registration of Hidden Taxpayers Design of MSE Tax Registration Campaign (Philippine-BIR Experience) Slide 5

6. REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE • Intensive Tax Information Drive • Making the Public Know • Avail of the services of print, television and broadcast media • Regional and district offices conduct tax information drive per industry • Tax assistance personnel at the District are trained to process/facilitate taxpayers registration Slide 6

7. REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE • Tax Mapping Operations • or the Tax Compliance Verification Drive (TCVD) • Objectives: • Expand data base – capture unregistered taxpayers into the tax net • Enhance voluntary tax compliance • Giving assistance or information drive on taxpayer’s compliance requirement Slide 7

8. REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE • Tax Mapping Operations or the TCVD • Process: • District area divided into tax zones • Each Tax Zone assigned to Revenue Officers • Conduct of tax mapping saturation drive by Revenue Officers: • On-the –spot determination of taxpayer’s compliance • Fill-up data on Taxpayer Information Sheet • Issue reminder letter to taxpayers on their violations • Apprehend unregistered invoices/receipts found in the premises including unregistered POS/CRM • Issue BIR printed receipts (BPR) • Require unregistered taxpayers to register in 24 hours Slide 8

9. TCVD - AS COLLECTION INITIATIVES • Produces revenue impact thereby improving voluntary compliance by registered taxpayers • . TAX INFORMATION SHEET Slide 9

10. REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE • Proper Execution of Tax laws on Registration • Primary Registration • Enter into a Memorandum of Agreement (MOA) with the Local Government Unit for a one-stop-shop registration of businesses. • Require taxpayers to undergo a one-hour Tax Briefing, before the awarding of the Certificate of Registration • Secondary registration • Yearly and monthly tax compliance for • √ VAT/Percentage Taxes • √ Withholding Taxes • √ Income Tax • Secondary Registration • Registration of (1) Books of Accounts, (2) Sales Invoices or Official Receipts, (3) POS/CRM Slide 10

11. REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE • Monitor Tax Compliance • Increased tax base • Increased tax payments • Enhanced voluntary tax compliance Slide 11

12. REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE • Whistle-Blowing Scheme • Whistle Blowing in the Philippines has been encouraged/implemented Slide 12

13. REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE • Tax Audits and Systematic Information Cross-checking • Tax audits and systematic information cross-checking for identifying non-registered taxpayers has been institutionalized Slide 13

14. REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE • IMPACT OF SMALL BUSINESS FORMALIZATION Small Business Formalization Increase Collection Increase Taxpayer Base Thru Data-capture Slide 14

15. T C V D • BENEFITS OF DATA/INDUSTRY ANALYSIS Common Violations Noted Per TCVD: Regional / District Level • Data Analysis thru Inverted Pyramid Cluster 1 * Sister companies farm out invoices as source of input * Use of unregistered delivery receipts * Maintained a carry over input VAT Contribute 70-80% collections 1 Top 300 TPs Cluster s Cluster 2 * Use of unregistered sales invoices / official receipts & delivery receipts * Use of unregistered invoice, O.R. and POS or CRM * Paid VAT below non-VAT 2 20% coll. Top 1,500 Corp. TPs Registered taxpayers collection 10% coll. Corp. & Individual Taxpayers Cluster 3 * Rampant non-issuance of invoices or receipts * Use of unregistered invoice, O.R., delivery receipts or POS / CRM * Operating w/out business registration * No Books of Accounts 3 Underground TPs ? Slide 15

16. REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE RR7-QUEZON CITY Year 2001 - 2008 Note: 2007 collection decreased due to delisting of taxpayers Slide 16

17. REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE CONCLUSION / RECOMMENDATION • Simplify Procedures and Compliance Requirements • Align Strategy and Operations • Manage Change Slide 17

18. SALAMAT PO!