Tax Articles

Embracing Information Technology in Taxation

By: Atty. Jomel N. Manaig

The BIR has been front and center in several headlines the last couple of weeks but, unfortunately, not for the best of reasons. From the Megaworld task force fiasco to the missed collection target, the BIR is in a dire need of a sustained win.

That win may come in the face of its new incoming Commissioner, Lilia Guillermo. A former Deputy Commissioner and the current Assistant Governor of the Bangko Sentral ng Pilipinas, her background in tax and information technology may breathe in some new life into the BIR. But what exactly can information technology do to advance the cause of taxation?

The rising reliance in the processing of digital data and use of virtual means to fill the holes in traditional tax audits are commonplace, and even staples, in other taxing jurisdictions. The impressive use of information technology had allowed these foreign taxing jurisdictions to not only enhance revenue collection, but also improve taxpayer compliance and cooperation.

In several territories, tax authorities applied electronic and risk-based data processing to aid taxpayer compliance and verification.

In Chile, the tax authorities provide taxpayers an information technology system wherein the latter may conduct its tax-related compliance transactions (from starting a business to closing it). An online portal is likewise given to taxpayers which gives them a customized view of their respective tax obligations, such as tax filings. This allows taxpayers, as well as tax officials, to instantly monitor and review tax compliance. Online requests have been overwhelmingly positive which shows the clear impact that the system has on taxpayer compliance.

Not to be outdone, the tax authorities in the Netherlands are taking data processing to new heights by applying a risk-based approach in the analysis of tax returns and sending “pro-memoria” letters to taxpayers who have most likely committed potential errors or mistakes in their tax returns. As a strong positive response, approximately 70% to 75% of the notified taxpayers voluntarily amended their respective tax returns.

Aside from data processing, the BIR may also make remote communication tools a standard when it comes to taxpayer interaction. This would require the development of innovative IT solutions.

In Chile, Georgia, Hungary, Peru, and Spain, to name a few, various remote inspection and electronic audit platforms were developed to reduce, if not eliminate, face-to-face meetings. This resulted in an improved and efficient quality of audit by reducing the time to conduct the audit, use of less resources to provide needed documentation, and full digitalization of files and communication, among others.

Taking things further, India implemented the “Faceless Scheme” which spans assessments, appeals, and penalty computations. Under this scheme, a centralized body facilitates all assessments, appeals, and penalty computations by assigning the same to regional centers via an automatic allocation system. It favored dynamic jurisdiction over the traditional fixed jurisdiction through reliance on electronic means of communication. This paved the way for optimal utilization of resources leading to increased efficiency, transparency, and accountability.

The BIR, to its credit, had adopted electronic means in some of its services. The eFPS and eBIRForms facilities enabled taxpayers to digitize their tax filings and allow electronic payment of taxes. Electronic invoicing also enables instantaneous reporting of transactions. But compared to other taxing jurisdictions, more can be done. And more should be done.

For starters, the BIR may make more of its services and processes available digitally. Tax services like application for TIN, updating of registration information, or submission of documents, among others, may be done through a dedicated online portal for the convenience of taxpayers. Specialized systems designed to improve efficiency may be custom-made to handle the digital shift of internal processes of the BIR like approvals and movements of documents and records from one office, district, or region to another.

With the expansion of telecommunication facilities in the Philippines, the BIR should ride the wave of technological advancement and embrace the digital march of progress. It will be tough and the investment will be substantial. Dynamic and innovative steps would need to be taken. But for the BIR to achieve significant and sustained wins, nothing less is required.