Raising the bar on accountability

If both accountants and lawyers cannot be held accountable, whom do we trust then?

Amid all the corruption issues against high-ranking officials in both public and private institutions, can we still say that “honesty is the best policy”?

Are the violators held accountable or do they simply get away with it and worse, continue to renew their professional licenses and run for public office?

So what happened to “public service is a public trust”? People will always find an excuse or reason if nobody wants to be accountable.

This must stop now!

In the recent past, the license of a celebrity doctor was revoked due to his sex video scandal although he was reinstated in the medical profession two years after.

Accountants and lawyers who are involved in more scandalous and immoral acts of graft and corruption should be disbarred.

Their professional licenses must be revoked permanently.

Business entities, like government agencies, have to hire or appoint either an accountant or lawyer to their management committee.

Generally, the finance department is headed by an accountant (preferably a CPA or Certified Public Accountant) and its annual financial statements are audited by an independent CPA, while the legal officer or its corporate secretary is definitely a lawyer.

Both professions are regarded with high respect. But can we really trust them?

Passing the CPA Board or Bar exams (for lawyers) is not easy.

But why does it seem so easy for our accountants and lawyers to disregard the professional code of ethics, to compromise their values, to cheat or lie, and to content themselves with making more profit at the expense of their credibility?

The reputation of both accountants and lawyers is being jeopardized by these alleged corrupt officials, fixers, cheaters and liars plaguing our society, and every business or government agency they join.

At the very least, are they declaring true profit and paying the right taxes? I guess not.

In view of the proposed comprehensive tax reform package, we need to consider imposing a stricter rule to raise the bar on accountability among accountants and lawyers who are working either as examiners in the Bureau of Internal Revenue (BIR) or as independent auditors or tax agents.

During the recent House of Representatives Ways and Means Committee inquiry on the reduction of Del Monte Philippines Inc.’s tax deficiency taxes for 2011 to 2013, BIR Commissioner Caesar Dulay already hinted at plans to come up with rules to prevent the occurrence of significant discrepancies between the tax assessments issued by BIR examiners and the actual payment supported by official receipts.

It is an open secret how BIR examiners are using these huge assessments to harass taxpayers.

There seems to be no accountability as to whatever preliminary assessment they issue and worse even if they “cut and paste” the same (even after a protest is submitted) as their final assessment.

Why not use the 30 percent under or over declaration threshold for tax evasion as benchmark to evaluate quality of tax assessments made by BIR examiners? This means if a BIR examiner issues a P10-million tax assessment, he should be able to collect at least 70 percent of it, otherwise he should be summoned to explain, or be dismissed if he irresponsibly issues a tax assessment without an audit or what is called a jeopardy assessment.

Jeopardy assessment must not be a norm. An examiner must be restrained from issuing an assessment without a proper audit conducted at the registered business address of the taxpayer.

And this audit must be done in no more than 180 days or six months, unless a taxpayer requests for a 30 to 60-day extension to complete the audit and assessment.

Moreover, a taxpayer must be selected randomly or based on risk assessment per industry. Any taxpayer must be subject to audit only once every three years. The second year must only be a tax verification to check if the findings or assessment in the previous audit has been complied with.

Unless there is an evidence of fraud, the BIR must not audit any taxpayer every year and must not issue more than one kind of audit like VAT audit, Letter Notice, Benchmarking, etc., to avoid harassing or unnecessarily burdening taxpayers to attend to several BIR requirements all at the same time.

The Revenue District Officer (RDO) whom I assume is also a CPA and/or lawyer must be accountable to the Commissioner of Internal Revenue or his representative, i.e. Regional Director, in submitting a monthly status report on the progress of all ongoing audit and the reason for pursuing it.

At the moment, each BIR examiner is authorized to audit 30 taxpayers at a time. This should not be the case if BIR can hire more competent and honest accountants to audit at least 10 percent of the total taxpaying population.

The tax reform must include exempting BIR personnel from the Salary Standardization Law, and Congress must double or triple the budget appropriation to fully fund its operations, especially enforcement activities, to run after big time tax evaders and its massive recruitment.

If we can allot P25 billion (or 0.6 percent of the P3.8-trillion proposed national budget for 2018) for the Conditional Cash Transfer Program, why can’t the government invest in the overhauling of the BIR, which is tasked to collect 80 percent of total government funds.

According to the 2015 Annual Report of BIR, we have a total of 27.2 million taxpayers, of which 14 million are employees who are not subject to regular audit. Less than 3,000 examiners are deployed to audit more than 13 million corporate and individual taxpayers.

In fact, we have saved a lot in collecting P1.44 trillion in 2015 at P0.48 cost per P100 revenue collection or a total of only P6.9 billion budget for BIR.

Similarly, independent auditors who are signing annual financial statements of all registered professionals and corporations, including nonprofit organizations, must be held accountable for any material misstatement not disclosed in their audit report.

Any accredited CPA who signs an unqualified audit report of a taxpayer who is later charged of tax evasion must also be held accountable.

A 30 percent under declaration is a material misstatement but why are we not making our supposedly independent auditors accountable?

What is then the value of accreditation and renewal of license if anybody continues to practice their profession, regardless of their moral standing and bad reputation?

If independent auditors must be held accountable, much more the finance officer or accountant who prepares erroneous financial statements with material misstatement. Again, if found by BIR to have under-declared at least 30 percent, the accountant must be held accountable even if it is the management’s responsibility to make full disclosure.

Raising the bar on accountability is easier said than done as most of those in positions will be affected.

But if we want to protect the next generation, our country at large, a public accountant and a lawyer involved in any graft and corruption, extortion, bribery or any dishonest act must face revocation of their professional licenses (or even the death penalty).

If we want a better Philippines, we need to be better citizens, better taxpayers!