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

Two (2) Taxing Authorities : 1.Local government under the Local Government Code, RA 7160, and 2.National government under the National Internal Revenue Code, RA 8424 as amended. BACKGROUND: REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE Slide 2

Government Documents as Prerequisite for Business Registration at the Bureau of Internal Revenue 1.For Single Proprietorship - Certificate of registration of business name with the Department of Trade and Industry (DTI) 2.For Corporation - Securities and Exchange Commission (SEC) Registration Certificate REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE Slide 3

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

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

I.Intensive Tax Information Drive REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE Slide 6 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

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

Tax Mapping Operations or the TCVD Process: REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE Slide 8 a.District area divided into tax zones b.Each Tax Zone assigned to Revenue Officers c.Conduct of tax mapping saturation drive by Revenue Officers: 1.On-the –spot determination of taxpayers compliance 2.Fill-up data on Taxpayer Information Sheet 3.Issue reminder letter to taxpayers on their violations 4.Apprehend unregistered invoices/receipts found in the premises including unregistered POS/CRM 5.Issue BIR printed receipts (BPR) 6.Require unregistered taxpayers to register in 24 hours

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

a.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 (1) Secondary registration (2) Yearly and monthly tax compliance for VAT/Percentage Taxes Withholding Taxes Income Tax REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE Slide 10 III.Proper Execution of Tax laws on Registration b.Secondary Registration Registration of (1) Books of Accounts, (2) Sales Invoices or Official Receipts, (3) POS/CRM

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

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

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

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

Data Analysis thru Inverted Pyramid Slide 15 BENEFITS OF DATA/INDUSTRY ANALYSIS TCVDTCVD Top 300 TPs 20% coll. Contribute 70-80% collections Top 1,500 Corp. TPs Corp. & Individual Taxpayers Underground TPs 10% coll Regional / District Level Cluster 1 * Sister companies farm out invoices as source of input * Use of unregistered delivery receipts * Maintained a carry over input VAT 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 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 Common Violations Noted Per TCVD: Cluster s collection Registered taxpayers ?

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

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

SALAMAT PO! 18