BIR: Worker tax relief to cost firms

MANILA, Philippines - Company payroll systems, along with a host of procedural requirements, need to be updated to conform to a newly enacted tax relief law, a process which the Bureau of Internal Revenue (BIR) on Tuesday admitted would neither be cheap nor easy. Marivic A. Galban, chief of the BIR’s withholding tax division, told a public hearing Tuesday that employers have until the end of the year "to do necessary modifications" of their accounting systems. "It will be a burden to you preparing one alphabetical list in the middle of the year and another one in the end of the year. There will be two submissions to BIR. Technically, it is like issuing two BIR Form 2316s (Certificate of Income Tax Withheld on Compensation). It is very costly," she said. However, Ms. Galban said the tax bureau was looking at ways to reduce the cost for companies, including letting revenue district offices handle part of the job. Tuesday’s public hearing aimed to gather comments regarding proposed revenue regulations that would implement the new tax scheme. The draft states that the alphabetical list of employees must also cite the nontaxable statutory minimum wage (for minimum wage earners only); nontaxable holiday pay, overtime pay, night shift differential pay and hazard pay (for minimum wage earners only); amount of exemptions for January to July 5, 2008; amount of exemptions for July 6 to December 31, 2008; and the amount of exemptions for January 1, 2009 and beyond. There should also be a separate listing of employees whose compensation is exempt from withholding tax but subject to income tax; employees whose compensation are exempt from withholding tax and not subject to income tax (minimum wage earners); employees as of December 31 of the taxable year without previous employment within the year; and employees who received fringe benefits subject to the fringe benefit tax. Since the law, Republic Act 9504, will not be retroactive to the start of the year, there will be two computations and alphabetical lists for the periods covering January to July 5, 2008, and July 6 to December 31, 2008. RA 9504 will take effect next week or on July 6, 15 days after its publication in at least two newspapers of general circulation. The law provides an increase in personal and additional exemptions for individual taxpayers and formalizes the income tax exemption of minimum wage earners in both the private and public sectors. There will be two withholding tax tables to be used in computing withholding taxes for 2008. Current exemptions will be effective until July 5 while the employer will use a revised transitional withholding tax table using for the rest of the year. The revised withholding tax tables for compensation earned starting January 2009 and beyond will be applied next year. Four withholding tax tables are prescribed in the regulations: monthly, semimonthly, weekly and daily depending on the payroll period used by employers. All employees have to update their taxpayer information, along with the required documents. These must be submitted to their employers not later than September 30. Employers need to transmit both original and duplicate copies to BIR revenue district offices before October 31. As this developed, BIR deputy commissioner Nelson M. Aspe said value-added tax (VAT) collections will likely go up as employees will likely use their additional take home pay to buy goods and services. "If a minimum wage earner saves around P760 monthly, that means we are assured in all probability this will go into circulation," he told reporters. Joel Tan-Torres, a partner at SGV & Co., told BusinessWorld it would be a challenge for BIR to disseminate information about the law to its personnel and taxpayers. "They have the whole of July to do that but it has to be done as soon as possible. They have to finish the regulations and Finance department has to sign this immediately," Mr. Torres said. Taxpayers with consultants will be adequately be prepared, he added. "What is difficult is the greater number of smaller tax payers without full time consultants. They will be getting their information from BIR sources," Mr. Torres said. - BusinessWorld