Tax Articles

Bayanihan 2: From Healed to Recovery?

By: Atty. Lino Ernie M. Guevara

As the clock ticked last week, both Houses of Congress were scurrying to pass on third reading their respective bills extending the life of Republic Act (RA) 11469 (“Bayanihan to Heal as One Act) [Bayanihan 1] as it was set to expire after 3 months or upon Congress’ adjournment. Our Constitution provides that emergency powers granted by Congress to the President, shall “cease upon the next adjournment thereof”. Hence, it was to be effective until June 5 or before Congress adjourns sine die (“without day”) from June 6 to July 24. Unfortunately, both bills, to be known as “Bayanihan to Recover as One Act” [Bayanihan 2], if passed, did not beat the clock. Congress waited, but the President did not certify the bills as urgent. News had it that the Executive Branch wants “contentious” amendments resolved first and, more interestingly, was taking the position that it is effective until June 25, 2020 under its own sunset clause.

The void left by the law’s demise could pose myriads of legal issues in the continuity of availing some grants, assistance and incentives under it prospectively, like the tax and duty-free importations of goods, equipment or supplies per Sec. 4(o) of RA 11469 which were time-bound. Likewise, the penal sanctions can no longer be imposed against any violators.

Senate Bill (SB) 1564 was able to hurdle its second reading and was subjected to amendments including reducing the stand-by fund from P236B to P140 B based on the government’s appeal that it can no longer afford spending more than that. The House of Representatives, constituted as a committee of the whole, had also approved House Bill (HB) 6953 extending its validity until September 2020 with a higher funding in the amount of P162B.

Both bills reiterated all the 30 powers granted under RA 11469, plus a lot more.

Congress seeks to do away with the emergency powers of the old law but instead provide COVID-19 “response and recovery interventions”, with more coverage and funding. The Bayanihan 2 bills likewise stripped the law of its penal sanctions. This is a fair move as it was perceived to have been inequitably applied against ordinary folks while ranking government officials caught red-handed blatantly violating the rules were not penalized nor even rebuked.

Let’s check out some of the provisions on sectoral interventions and the extensions or grace periods provided under the proposed bills.

On Sectoral Interventions

The Bayanihan 2 bills now provide for loan assistance, subsidies or grants to schools, universities, colleges, technical vocational institutions, teachers and students for purchasing distance learning tools, computers and other devices. The House Bill provides massive promotion of online commerce with technical and financial assistance through GFls. This is a positive development to complement the new legislations for tech companies, RA 11293 (“Philippine Innovation Act”) and RA 1137 (“Innovative Startup Act”) focusing on giving incentives to startups and MSMEs as drivers of growth in the digital economy. However, they may also be impacted by a pending legislation at the House, HB 6765, seeking to clarify the taxation of the digital economy. The SB and HB bills also seek to provide regulatory relief to the creative sector by tasking DTI and DILG to review the amusement tax imposition. This may be timely for the entertainment industry hard hit by the lockdown and further complicated by the franchise controversy of a major network. Loan and credit facilities, among others, will likewise be extended to the transportation, agriculture and tourism industry. Fast-tracked and simplified loan processing and requirements are likewise extended to home loan borrowers.

On Filing and Payment Extensions During Quarantine

Both bills reiterate the grant of a minimum 30-day grace period for loans by banks, financing companies, GFI’s and the like, but now expressly mentioning real estate developers and, in the SB, utility companies. HB specified though that this shall not apply to interbank loan and bank borrowings. They also reiterated the 30-day grace period for residential rents, with the House Bill now including commercial rents and MSMEs. This should address the issue on the legal basis of extending the privilege to commercial leases only by virtue of an issuance by the DTI. The bills now include the extension of utility payments (electric, water, telecommunication) for a similar period of 30 days and payable afterwards on a staggered basis. There are also new provisions pertaining to the extension of the term of standby loans entered into by LGUs.

The provision as to moving the statutory deadlines and timelines for the filing and submission of any document, payment of taxes, fees, and other charges required by law [Sec.(z), RA 11469] was likewise retained in both versions, without any changes. And that may just be the problem. This provision should be made more categorical as to its mandatory nature. It should likewise be pointed out that such provision as presently worded cannot be used as legal basis in extending various statutory periods prescribed under the Tax Code.

Note that the BIR extended the various filings and payments of taxes in April and May, after initially refusing to do so in the early days of the quarantine. However, it recently issued Revenue Regulations (RR) No. 12-2020 expressly repealing any further extension of the filing deadlines due to another quarantine extension and instead maintaining the deadlines provided under RR 11-2020, “regardless of any extension or modification of quarantine”. Shouldn’t said Section (z) of RA 11469 be treated as mandatory similar to the grace periods for loans and rents being strictly monitored and implemented? I believe it should. Tax payments also involve substantial disbursements from taxpayers. A clarification and providing a specific period of extension would be more beneficial to taxpayers, not leaving it entirely to BIR’s discretion.

Secondly, our Tax Code specifically prescribes various statutory periods, namely: the 3- or 10-year prescriptive period for the BIR to assess, 5-year period to collect taxes and the 2-year period to file a claim for refund or credit. As these periods are provided under the law, only another legislative act may effect the amendments to these specific prescriptive periods. As worded, Section 4(z) of RA 11469’s moving of deadlines was limited to “the filing and submission of any documents, the payment of taxes, fees and other charges required by law”. The BIR’S previous suspension of the running of the Statute of Limitations in the assessment and collection of taxes under Revenue Memorandum Circular (RMC) No. 34-2020 was anchored on Section 223 of the Tax Code, i.e., when the Commissioner is prohibited from making the assessment or enforcing tax collection during said period. Recall that the grounds cited for the suspension were the Covid-19 pandemic and various proclamations. Invariably, however, such “suspension” had the practical effect of “extending” the period for the BIR to assess and collect. Note that such suspension was for a “period starting on March 16, 2020 until the lifting of the state of national emergency and for sixty (60) days thereafter.” So, if we are still within that period, the BIR is given a much longer time to prepare for and make an assessment against targeted taxpayers to the prejudice of the latter. On the other hand, we, as taxpayers, are already obliged to comply with the non-extendible filing and payment deadlines under the BIR’s recent issuance notwithstanding that a community quarantine is still in effect.

As RA 11469 heaved its last breath, we can only anticipate what the next law would be. Law can empower. We pray it is one which would genuinely bring true “healing” from the scourge of this pandemic, and more importantly, lead our country to that road to real recovery.