Data-sharing deal to help BIR go after ‘big-time’ tax evaders

The Bureau of Internal Revenue (BIR) vowed to run after big-time corporate tax evaders as the agency can now access documents filed with the Securities and Exchange Commission (SEC).

“The BIR will maximize our partnership with the SEC by running after big-time corporate tax evaders. This sharing of information between the agencies will be used to investigate large-scale tax fraud activities perpetrated by companies such as that of ghost receipts and corporate tax evasion,” BIR Commissioner Romeo D. Lumagui, Jr. said in a statement.

Under a data-sharing deal, the BIR will have access to the SEC’s Swift Corporate and Other Records Exchange protocol where it can check all the corporate documents of any SEC-registered taxpayer in real time.

The BIR can look into the documents, such as articles of incorporation and annual financial statements, that are crucial to corporate tax fraud investigation or audit.

For its part, the BIR will provide SEC with a tax identification number verification for the latter’s online digital services to enhance its monitoring of the capital market.

Analysts said the new data-sharing deal between the BIR and SEC will help boost state revenues as the former ramps up its efforts to go after tax evaders.

“By granting the BIR access to essential documents such as articles of incorporation and audited financial statements, this initiative aims to streamline tax assessments and combat tax evasion. Companies will face stricter compliance requirements, while the SEC’s digital platforms simplify document submission and authentication,” Globalinks Securities and Stocks, Inc. Trader Mark V. Santarina said in a Viber message.

“The ease of data access for regulatory bodies necessitates accurate filings to avoid penalties,” he added.

AP Securities, Inc. Senior Research Analyst Francis Ferdinand D. Subido said this will result in increased transparency in the corporate sector.

“Company financials will better reflect the impact of taxes paid to their assets, especially to their cash,” he told BusinessWorld in a Viber message.

“Before, since companies submit another copy of their financial statements to the tax collectors, there is a misalignment in the timing of taxes paid to authorities versus the income tax expense recorded during the financial reporting period. This is why we get deferred tax assets and liabilities,” he said.

COL Financial Group, Inc. Chief Equity Strategist April Lynn Lee-Tan said in a Viber message that the data-sharing agreement makes it easier for the BIR to identify which companies are not paying the correct taxes.

“The BIR would need to look at a company’s financials to know how much taxes need to be paid,” she added.

The government loses around P500 billion annually due to tax evasion, the BIR said last year.

“This (data-sharing deal) can boost government revenue and promote fairer competition within the Philippine economy, but both agencies need to address data security, standardization, and staff training to ensure its effectiveness,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

Mr. Subido said the data-sharing agreement will also support the government’s push to improve tax administration.

“Gaining access to the financial statements will allow regulators to better understand the accounting methods that companies use. They can better get a gauge of what the true taxable income amount should be,” he said.

“This might even attract more businesses to the Philippines, because as we know, the amount of red tape here is something that has been keeping businesses away,” he added.

Mr. Santarina said the data-sharing initiative will also increase confidence in the local capital market.

“The SEC’s collaboration with other agencies underscores the importance of adhering to regulatory standards, enhancing comprehensive business activity monitoring, and potentially boosting investor confidence in the capital markets industry,” he said.

Ensuring the ease of making tax payments would boost compliance among taxpayers, said Benedicta Du-Baladad, founding partner and chief executive officer of Du-Baladad and Associates.

“When taxpayers feel that taxes are fair, clear, easy to comply with, and consistent in their application, there is a natural attraction for taxpayers to voluntarily comply without the BIR going after them,” she said in a Viber message.

The passage of Republic Act No. 11976 or the Ease of Paying Taxes law would also help improve the digitalization and taxpayer services of the BIR. – Revin Mikhael D. Ochave, Reporter, with Beatriz Marie D. Cruz