Byline: BERNIE CAHILES-MAGKILAT

The Board of Investments and the Bureau of Internal Revenue have amended an existing guidelines putting in stringent measures in the availment and grant of incentives of companies in an effort to plug tax leakages.

Trade and Industry Undersecretary

The amended guidelines came after the publication of the Reside study, which pointed out the huge tax ITH leakages.

"These will plug loopholes," Hernandez said noting that under the old procedure companies, even those that are not registered with the BoI, could file for ITH claims when they file their income tax return (ITR) with the BIR even without the endorsement of the BoI.

As a result, it became automatic for the BIR to factor in the ITH claims of companies against their tax obligations.

Under the new amended guidelines, every ITR with ITH claim must be supported by a certificate of ITH entitlement to be issued by the BoI. The BIR shall consider claims with BoI endorsement as null and void.

In addition, any ITH application filed beyond the 30-day period from date of filing with the BIR shall no longer be accepted by the BoI and as such, the penalty provision will have to be deleted.

The BoI, too, has only one year to process, review and act on all ITH applications filed for a given taxable year. In the event that a certain application cannot be processed/evaluated within the prescribed period due to certain policy/legal issues, the BoI will require the firm to secure from the BIR a waiver of statute of limitation so as not to be covered by the three-year assessment period.

These more stringent guidelines were adopted after the Department of Finance found out the wide disparity between BIR's and BoI's ITH data and the flaws in the procedures in the availment and grant of the ITH incentive.

The DoF data showed a difference of around P5 billion on the average per year between the BIR's and BoI's ITH data.

The DoF has traced the difference in BoI and BIR data to three areas: BoI registered firms still availing ITH after the expiry of their entitlement; whose registrations have already been cancelled; and overclaims by non-registered activity or worse firms that are not registered with the BoI.

Apparently, the BIR considered these claims as valid even without the required BoI endorsement.

Data showed that for the period 2000 to 2005, the BIR reported total ITH claims of P105.7 billion as against the BoI report of ITH availments of only P42.1 billion or on an annual average of P21.14 billion in ITH availed of by BoI firms.

The BoI grants four-year ITH to new non-pioneer domestic and export-oriented enterprises while pioneer enterprises are granted six years.

There will be one-year ITH bonus for each of the three criteria for extension of ITH complied with like incremental exports but not to exceed a total of 8 years.

The BoI though has been trying to address this issue through a MoA between the BoI and the BIR, the draft of which was provided to the BIR as early as 2002 to implement strategies that will enhance tax enforcement through effective monitoring of incentives.