House committee okays bill simplifying corporate taxation

House committee okays bill simplifying corporate taxation

By Paolo Romero (The Philippine Star)
Updated April 04, 2011 12:00 AM

MANILA, Philippines - The House committee on ways and means has approved a bill seeking to simplify the availment of gross income tax for corporations, and which is expected to make tax administration efficient and raise more revenues for the government.

Batangas Rep. Hermilando Mandanas, chairman of the committee and author of House Bill 4361, said the measure would also encourage more corporate taxpayers to file returns.

The bill simplifies corporate income taxation by removing all unattainable requisites in taxing corporations based on gross income.

“Taxpayers need not substantiate and specify all of the allowable deductions which entail tedious compliance and administration process, and is perceived to be susceptible to abuse or manipulation by both taxpayers and tax examiners.

Every item of expense can be subjected to scrutiny as to whether or not such is really a necessary or legitimate expense. This situation greatly erodes the tax base and consequently reduces the government’s tax take,” Mandanas said.

He said the proposal is also consistent with one of the principles of a sound tax system, which is proper and efficient tax administration of the government.

 “Its enforcement with the least inconvenience to the taxpayer will be achieved. With this measure, tax administration will be much easier,” he said.

Mandanas said the areas of discretion will be minimized as the tax examiners shall validate only the accuracy of the corporate taxpayer’s gross sale or receipts, and cost of goods sold or cost of services.
 
“Cost of goods sold is the business expense directly incurred to produce merchandise, while cost of services refers to all direct cost and expenses necessarily incurred to provide services required by the customers and clients,” he said.

Mandanas said the bill would lessen paperwork for both the taxpayer and tax examiner as the substantiation requirement will be significantly reduced.

 “More taxpayers will be encouraged to file their returns. And with more taxpayers, tax collection will consequently increase. The gain in terms of improved tax compliance and collection will definitely contribute to the country’s economic stability,” he said.

The bill seeks to amend Section 27 of the National Internal Revenue Code (NIRC) of 1997, as amended, which provides for income tax rates on domestic corporations.

The present law provides that the President, upon recommendation of the Finance Secretary, made effective Jan. 1, 2000; allow corporations the option to be taxed at 15 percent of their gross income after four conditions have been met.

These four conditions are the tax ratio of 20 percent of Gross National Product; ratio of 40 percent of income tax collection to total tax revenues; VAT tax effort of four percent of GNP; and 0.9 percent ratio of the Consolidated Public Sector Financial Position (CPSFP) to GNP.

Mandanas said the bill simplifies corporate income taxation by removing all of these unattainable requisites before a corporation can be taxed based on gross income.

It provides that corporations have the option to be taxed at 18 percent of their gross income. Such choice shall be made at the beginning of the taxable year by information to the Bureau of Internal Revenue (BIR) Commissioner of the taxpayer’s decision to avail himself of gross income taxation. Once the decision has been made, this shall be irrevocable within the taxable year based on the bill.

It further provides that a corporation which is entitled to and is opting for gross income taxation shall not be required to submit with its tax return such financial statements otherwise required under the NIRC. Such corporate taxpayer shall likewise enjoy the benefit of last priority audit.

--
---------------------------------------------
CARLOS ANI - SEEDFINANCE Corporation - http://www.seedfinance.net
Email: carlosani@seedfinance.net
Landline: +63495010127 Cellphone: +639152919580
DEVJOBS - http://www.devjobsmail.com
PHILDEVFINANCE - http://phildevfinance.posterous.com http://phildevfinance.wordpress.com
CONSULTING - http://www.carlosani.com
My Clippings - http://www.myclipps.posterous.com
------------------------------------------