The presumption of regularity afforded to the revenue examiners in the assessment of taxes and

the vested power of the Bureau of Internal Revenue (BIR) to unilaterally determine any
deficiency tax make the playing field in the Philippine Tax System unevenly matched.
In the recently concluded Grant Thornton International tax academy held here in Makati City, I
had the chance to glimpse the prevailing tax systems of some Asia-Pacific countries, namely:
Australia, Malaysia, China, Indonesia, Japan, Singapore, Thailand, and India. During the
conference, I discovered that the indirect tax systems in these countries are closely similar to
ours.
Initially, I thought there is nothing much to discuss as we follow the same tax principles, e.g.,
destination principle, consumption tax, self-assessment. However, as the conference continued,
I was upset to learn that the Philippines has a high value-added tax (VAT) rate compared with
the other Asian countries whose VAT rates only range between 0%- 10%.
I was also surprised to discover that claims for tax refund in Singapore are as simple as
presenting the sales invoice to the tax authorities. If the refund is found valid, the tax refund
shall be immediately paid to the taxpayer, without the need of waiting for prior appropriation
from their government.
In the Philippines, the taxpayer shall be subject to prior audit upon application for a tax refund.
If based on the documents presented he is found entitled to a refund, he will have to wait for the
appropriation made by the Congress before he is issued his cash refund. This can take years
before a taxpayer can see a single centavo of his refund.
In Malaysia and Indonesia, if the issuance of a refund is delayed, their tax authorities are held
liable for interest. In the Philippines, the BIR is never charged interest for failure to refund taxes
promptly.
But what struck me most is Indonesias rule on resolving protests on deficiency tax
assessment. Here in the Philippines, the inaction of the Commissioner of Internal Revenue on
the protest within the prescribed period is deemed a denial of the protest. In Indonesia, the
reverse is true. The inaction of their Commissioner is surprisingly, deemed approval to the
taxpayers protest. This is probably a rule that we should adopt in the Philippines.
Taking into consideration the foregoing, maybe it is about time that our present tax laws are
revisited in their entirety. The decades-old income tax brackets, the procedures on tax refunds,
and rules on tax deficiency assessments should be crafted in a manner that would not only
consider the target tax collections but which would put the Philippines at par with its Asia-Pacific
neighbors in protecting taxpayers rights.
It cannot be denied that our tax laws and regulations are favorably tilted toward the tax
authorities. Since time immemorial, we have adopted the view that taxes, being the lifeblood of
the government, are important to a functioning and orderly society.

As a matter of fact, the BIR has been vested with ample powers in making tax assessments. To
ensure that taxpayers are paying the correct taxes, tax assessments are also accorded by law
with the presumption of regularity.
On top of the above presumption, the BIR has the power to adjudicate disputes on its own tax
assessment. This is bereft of any independence as the examiner who issues the assessment is
the same examiner who will validate and assess the reconciliation and factual and legal bases
of the taxpayer in asserting that the assessment is not valid or incorrect.
While it may be true that the court acts as the final arbiter of tax disputes, the high filing fees
and other legal costs nonetheless, makes tax appeal virtually impossible especially for ordinary
taxpayers.
Thus, I strongly urge Congress to pass neutral tax laws to level the playing field between the
taxpayers and the tax authorities. This is most important now that revenue examiners have
become more aggressive in issuing deficiency assessments to meet their increasing target
revenue collections. In fact, it is not uncommon now to see taxpayers receiving tax deficiency
assessments which are even higher than their net worth.
It is high-time to improve the safeguards of taxpayers rights from the possible abuse of power
by the revenue examiners.
The adoption of Indonesias timeframe in the issuance of a decision by the Commissioner, in
which claims for tax refunds and protest of deficiency tax assessment not acted upon will be
deemed approved, is a good measure to protect the taxpayers and to promote efficiency in the
administration of tax laws.
After all, taxpayers should not be left waiting in vain for the resolution of their protests and must
therefore be freed from unnecessary troubles and anxieties of tax assessments.
Now, to reduce questions on independence and preclude doubts of partiality and pre-conceived
bias by the BIR in the adjudication of tax cases, an independent administrative agency may be
established by the Congress. Such an agency will take over the determination of the validity of a
taxpayers protest and the validity on claims for tax refunds instead of having the BIR acting as
the prosecutor and adjudicator all at the same time.
Adjudicators should not only be independent, but must likewise give the appearance of
independence. While taxes are the lifeblood of a nation, taxpayers rights are important and
must always be protected.
Henesty Z. Salvador is an associate with the Tax Advisory and Compliance division of P&A
Grant Thornton.