Trade groups buck BIR disclosure rule

SEVERAL business groups are opposing a requirement taking effect this year for the mandatory disclosure of tax-free investments to the government, a move that may violate the public’s right to privacy and deposit secrecy.

In a position paper, groups representing big corporations, the financial industry and professionals such as accountants criticized the finance department’s decision to make the submission of so-called supplemental information returns (SIR) mandatory for this year’s tax season.

Last year, SIR submissions were optional.

“Among the income items required to be reported in the SIR are passive income items/receipts which are tax exempt, or have been subjected to final withholding taxes, as well as the final taxes withheld for each type of income,” the position paper read.

Examples of tax exempt income to be declared are proceeds of life insurance policy, return of premium retirement benefits, pensions and gratuities, and “personal/real properties received through gifts, bequests and devises.”

The position paper was signed by the Philippine Chamber of Commerce and Industry (PCCI), the Employers Confederation of the Philippines (Ecop), the Financial Executives Institute of the Philippines (Finex), the Management Association of the Philippines (MAP), the Philippine Exporters Confederation, the Philippine Institute of Certified Public Accountants (Picpa) and the Tax Management Association of the Philippines (TMAP).

Many of the items included in SIRs already have their own reporting requirements. This makes SIRs redundant, making it an additional burden to taxpayers. And since these items were either tax-free or have already been subjected to other government imposts, revenues would not increase, the groups said.

“Erroneous declarations in the SIR could also expose the taxpayer to penalties of perjury, just like other tax returns,” the PCCI said.

The PCCI added that one of the attractions for choosing investments with tax-free or net of tax yields was the exemption from the hassle of accounting for and reporting of income received from such investments in the case of individual taxpayers.

The PCCI said the requirement to account for and report such income—just like in the case of the mandatory SIR disclosure— negated that advantage.

For 2015, the Bureau of Internal Revenue (BIR) has a tax collection target of P1.72 trillion or 73.6 percent of all state revenues.