DOF urged to junk BIR’s tax refund circular

MANILA, Philippines–Twenty local and foreign business groups and industry associations have filed a joint letter and position paper urging the Department of Finance to junk the controversial circular on tax refund.

They claimed the tax refund circular was adversely affecting investor confidence in the government and would likely hamper the economy’s growth.

Representatives from the business community and industry groups yesterday said their main concern about about Revenue Memorandum Circular (RMC) 54-2014, which was issued by the Bureau of Internal Revenue in June this year, was the prescribed “120 + 30 day” period and the retroactive nature of the circular.

“Section 112 (C) of the NIRC provides that the (BIR) Commissioner shall grant a refund or issue the tax credit certificate within 120 days from the date of submission of complete documents. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within 30 days from the receipt of the decision denying the claim or after the expiration of the 120-day period, appeal the decision or the unacted claim with the Court of Tax Appeals (CTA),” the agency noted.

“Therefore, the NIRC provides that in the event the BIR does not act on the claim within 120 days, the taxpayer has the remedy to elevate the case to the CTA. RMC 54-2104 merely implements the said provision of law,” the BIR said.

According to the groups, what they wanted was for the BIR to provide an option for taxpayers to continue the administrative claim for refunds, and to apply another circular for new claims.

Otherwise, the RMC will have “negatively impact on foreign investors, exporters, regional operating headquarters, information technology and business process management companies, renewable energy projects, independent power producers and mining companies.”

“We see that the new BIR rule would result in outright denial with finality of pending VAT (value added tax) refund claims that are already beyond the 120+30-day period at the time of issuance of the RMC,” the groups said.

They noted that the implementation of the RMC had already been adversely affecting investor confidence in the government and the country’s competitiveness.

In effect, the RMC has made it more difficult for taxpayers to exercise their right to refund with due process and procedure. Because of the retroactive implementation of the RMC, it prejudices the rights of taxpayers with pending VAT claims, estimated to be worth at least P15 billion.

Henry J. Schumacher, vice president for external affairs of the European Chamber of Commerce of the Philippines (ECCP), stressed that it was unfair to enforce changes retroactively because it shortchanges the investors.

“If you to change rules, that’s acceptable. But it has to be done progressively. We’re up in arms because the RMC is more of looking back than looking forward. All we want is a fair treatment. We have been banking on the government’s benefit in saying these are incentives in doing business in the Philippines or investing in the Philippines,” Schumacher said.