BTr eyes new tax collection deal with banks

The Bureau of the Treasury is considering scrapping a system that allows banks to temporarily use taxes collected from the public for their short-term investments before remitting the money to the government.

National Treasurer Rosalia de Leon said one of the reforms seriously being considered by the BTr was the change in the way of remunerating banks for their services to the “fee” system from the current “float” arrangement.

The government tapped selected banks to serve as tax payment centers to boost tax its collection efforts.

Under the existing system, government-accredited banks enjoy a float period of six to 10 days, during which they can use their tax collections to generate investment income before remitting the money to the government.

Under the proposed fee-based system, banks will be required to automatically remit their tax collections to the government and they will be paid a certain fee for services rendered.

Tax payments made through and remained with the banks under this “float” system could hit as much as P100 billion in a given period.

De Leon said the BTr would meet with banking industry members to discuss the merits of the proposed reform and to consult them on the service fee that will be set.

The BTr came up with the proposal to change the system due to several problems encountered under the existing practice.

Because banks are allowed to keep tax payments for as long as 10 days, the BTr is forced to resort to borrowing when need for funds arises prior to the remittance.

Based on estimates, the government could save between P1.5 billion and P3 billion worth of interest payments yearly once it shifts to the fee system.

De Leon said another advantage of the fee system was that it would allow the BTr to determine the level of its cash position at the end of every working day.

She said the BTr aims to implement the shift from the float to the fee system in the first quarter of 2014.