BIR e-payment glitches increase taxpayers’ costs

MANILA, Philippines - Technical glitches in the Bureau of Internal Revenue’s electronic filing and payment system (eFPS) cost taxpayers not only millions in unnecessary expense but also cast doubt on the tax system’s integrity, tax experts said. Roberto L. Tan, a partner at Manabat Sanagustin & Co., said taxpayers who had to file tax returns late when the eFPS bogged down — for the second time in late May — had to pay surcharges and penalties. "These penalties ran into millions for the large taxpayers, considering the different taxes they pay regularly," he said. "For the government, the glitch and the manual filing that ensued hampered the usual data gathering." Joel Tan-Torres, a partner at SGV & Co., said the weakness in the eFPS could lead to a loss of confidence in the tax system. "Taxpayers expect the system to be in place as it should be. The tax system should be running on a regular and consistent basis," he said. The tax bureau launched the eFPS in 2001 to comply with the e-Commerce Act and to implement simpler procedures aimed at improving taxpayer compliance. Large taxpayers and the top 10,000 firms in the revenue regions, as well as insurance companies and banks, are mandated to use the eFPS. Some non-large taxpayers have also volunteered to use the system. Of roughly nine million registered taxpayers in the country, eFPS-registered firms and individuals numbered close to 68,000 in March, an increase from 2006’s 17,238. A taxpayer that wants to use the eFPS needs to enroll with the bureau and an authorized bank. Filing of tax returns is done by accessing the bureau’s website and using the available forms. Payment is done electronically through the banks. On April 15, the annual deadline for the filing of income tax returns, tax bureau chief Lilian B. Hefti issued a memorandum circular extending the deadline to April 17 after technical glitches hit the eFPS. She authorized the manual filing of tax returns yet also required, through another memorandum circular, that taxpayers file their returns electronically afterwards. Technical problems again hit the eFPS on May 26, the deadline for withholding tax payments, forcing Ms. Hefti to again order manual filing of returns. She did not extend the deadline. As in the previous instance, she also required electronic filing afterwards. Through a memorandum circular on May 27, Ms. Hefti also authorized the bureau’s Information Systems Group (ISG) to give advisories on the eFPS’ status on or before a deadline. Should the system become unavailable, taxpayers can automatically resort to the manual filing of tax returns. But they still need to file electronically within 15 days "to ensure submission of complete and accurate return data for uploading to the BIR Integrated System." "The ISG is hereby instructed to conduct a thorough study on the cause and reason of perennial eFPS limited capability during deadline date of any tax and come up with recommendations to solve the problem so as not to cause inconvenience to taxpayers," she also ordered. Benedicta Du-Baladad, head for tax advisory and compliance at Punongbayan & Araullo, said taxpayers whose systems and procedures were established to conform to the eFPS requirements would find it difficult to comply with manual filing on "very short" notice. "Manual filing has physical and time constraints. The taxpayer has to have a printed return, has to physically go to the bank and has to meet the timelines in terms of banking hours," Ms. Du-Baladad said. Emmanuel P. Bonoan, former Finance undersecretary and presently chief operating officer and vice-chairman for tax and corporate services at Manabat Sanagustin & Co., said the bureau needs to ensure that taxpayers are not burdened with penalties and surcharges once they file late because of eFPS malfunction. Victoria V. Santos, assistant commissioner for information planning and quality service, said the tax bureau was now looking into how to ensure that eFPS works reliably. "We are addressing the enhancement of the eFPS," she said in an e-mail. "We are actually in the process of testing enhancements. They are due for implementation next month. We have high hopes that this will solve the technical glitches occurring during deadlines." She said the technical problems encountered late last May were "unfortunate," and admitted that bureau services to taxpayers were affected. "But we did our best to assist them. Our technical support worked and received calls for assistance even beyond the official working hours," she said. SGV’s Mr. Tan-Torres said that to address problems in the eFPS, the tax bureau should put more money into acquiring more hardware, for instance. "The BIR is encouraging more taxpayers to use the eFPS - this is a good direction," he said. "But if the system can’t cope with that for some reason, there should be an intensive review to make use of its budget and make sure the system is properly working." - Ruby Anne M. Rubio, BusinessWorld