BusinessWorld: Large taxpayers face stringent audits

REPORT FROM BUSINESSWORLD Companies under the jurisdiction of the excise and division offices units of the Large Taxpayers Service should expect stringent audits in the coming months as the two groups try to recover their shortfalls in the first half of this year and hit their collection goals by yearend. The excise tax group, which oversees companies that pay excise taxes, said it will strengthen its audits by implementing a selective audit program and other audit-related enforcement activities such as the verification of tax returns and inventory stocktaking. Action plans On the other hand, the division offices group, composed of the Makati and Cebu division offices, said it will increase the number of audit cases. The two groups, plus the regular group, which oversees companies that do not pay excise taxes, unveiled their action plans for implementation this month up to December to attain their respective collection goals during a command conference attended by President Gloria Macapagal-Arroyo and Finance and Bureau of Internal Revenue officials last week. Still behind The three groups reported exceeding their respective July collection targets, but the Large Taxpayers Service (LTS), as a whole, was still far behind in its collections as a result of its shortfall in the January-June period. Preliminary data, based on purely tax bureau operations, showed the LTS short by P26 billion as of July, collecting only P234.8 billion. Meanwhile, an assessment of the tax bureau’s performance in the first half showed that collections of the value-added tax, excise tax, capital gains and documentary stamp taxes on real property and stock transactions, the income tax of individuals engaged in business, as well as the percentage and documentary stamp taxes on insurance had been very poor. The LTS is assigned to collect 64%-65% of the tax bureau’s P730-billion target from operations this year, with the regular group to collect P265 billion; the excise group, P160 billion; and the division offices, P43.6 billion. Expectations Audits, based on the excise group presentation, should bring in P600 million in revenues. Other initiatives, such as a review of revenue issuances, which have resulted in leakages instead of higher collections, should bring in P250 million, and a "reengineering" of the excise monitoring and control system, P200 million. The excise group covers companies belonging to the petroleum, tobacco, alcohol, mining, cement, automobile, cosmetic, jewelry, sugar and power industries. The division offices, on the other hand, oversee companies engaged in manufacturing, real estate, wholesale and retail, transportation, financial services, construction, food, communication and power generation. Increasing the number of audit cases should generate P150 million. Collection of banks’ deficiency taxes on their special savings accounts and foreign currency deposit units should generate another P150 million; taxpayer profiling and benchmarking, P100 million; post evaluation of point-of-sale and cash register machines, P50 million; and "effective implementation" of revenue issuances, P50 million. Priorities In an earlier interview, Cesar Charlie C. Lim, head revenue executive assistant for the regular division, said he will prioritize the collection of banks’ tax deficiencies on their special savings accounts and foreign currency deposit units and of insurance companies’ documentary stamp tax deficiencies. This, plus other priority actions such as more audits, industry and taxpayer profiling, and collection from delinquent accounts should generate a total of P4.9 billion. — Judy T. Gulane/BusinessWorld