BIR rule, tax law out of sync–solon

THE Senate was asked to frontload passage of a remedial legislation to “promptly” fix an “apparent inconsistency” in the implementing rules and regulations (IRR) of Republic Act 11534 and a ruling issued by the Bureau of Internal Revenue (BIR) last year.

In filing Senate Resolution (SR) 219, Sen. Ana Theresia “Risa” Hontiveros-Baraquel stressed the need to promptly convene the Congressional Oversight Committee on the Comprehensive Tax Reform Program to review Section 5 of the IRR and Revenue Regulations 21-2021, warning it “poses a threat to many domestic enterprises.”

SR 219 cited “deviations” that Hontiveros warns would “directly and adversely affect the cost of doing business for 212 domestic industries, while potentially discouraging other domestic firms from registering with investment promotion agencies (IPAs).”

The opposition lawmaker laments it would be “ the height of irony that while the President and other officials are trying to woo foreign investors, our tax laws are being interpreted in a way that will surely drive away investors in local businesses.”

“We cannot claim to be foreign-investor friendly while at the same disincentivizing foreign investments,” Hontiveros said.

The lawmaker said that the interpretation contained in the aforementioned IRR as well as Revenue Regulations 21-2021 appears to be inconsistent with the language and spirit of NIRC Section 295 (D), as amended, which is to make VAT exemption on importation and zero-rating on domestic purchases available to both export and domestic enterprises,” the resolution pointed out.

Moreover, it notes the said IRR limits the scope and coverage of VAT exemption and zero-rating of purchases, contrary to the goal of the Create law (RA 11534) of granting VAT exemptions on importations and zero-rating on domestic purchases.

At the same time, the senator stressed that “this interpretation of the Create Law has, in effect, cancelled the eligibility of all domestic enterprises registered with the country’s IPAs to avail of the VAT exemption on importation, as well as VAT zero-rating on local purchases.”

She suggests that “this disparity has to be examined promptly, so that the intended effects of the law may be fulfilled and our already overwhelmed local economy can be prevented from collapsing.”