Calls Mount for Stricter Penalties on Tax Officials Over VAT Refund Delays

Economists and tax experts urge the Philippine government to impose harsher penalties on internal revenue officers responsible for delayed VAT refund claims. A proposed bill aims to transfer the responsibility of handling VAT refunds from the BIR to the DoF Revenue Operations Group.

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Aqsa Younas Rana
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Calls Mount for Stricter Penalties on Tax Officials Over VAT Refund Delays

Calls Mount for Stricter Penalties on Tax Officials Over VAT Refund Delays

Economists and tax experts are urging the Philippine government to impose harsher penalties on internal revenue officers responsible for delays in processing value-added tax (VAT) refund claims. The calls come in response to a bill filed last week by Senator Sherwin T. Gatchalian proposing to transfer the responsibility of handling VAT refunds from the Bureau of Internal Revenue (BIR) to the Department of Finance (DoF) Revenue Operations Group.

Why this matters: The timely processing of VAT refunds is crucial for businesses to maintain their cash flow and invest in growth, and delays can have a ripple effect on the entire economy. If left unaddressed, this issue could lead to a loss ofinvestor confidence and hinder the country's economic development.

Gatchalian's bill aims to address the longstanding issue of delayed VAT refunds, which has led some companies to abandon their claims altogether. Senate President Juan Miguel F. Zubiri noted that Japanese firms have even threatened to pull out of the Philippines due to difficulties securing timely refunds. The American Chamber of Commerce of the Philippines reported that VAT refunds for jet fuel purchases can take up to five years to resolve.

However, some experts question whether transferring the refund mandate to the DoF alone will solve the problem. Public investment analyst Terry L. Ridon stated, "Transferring the tax refund mandate to the DoF is no assurance that this proposed new VAT refund body will not implement the same inefficiencies as the BIR." He emphasized the need for stiffer penalties against BIR officials in cases of unreasonable delays.

Tax expert Benedicta Du-Baladad offered several suggestions to improve the refund process. She proposed that the BIR strictly adhere to the 90-day period for challenging tax assessments, with any refund granted beyond this timeframe earning interest at the same rate as delayed government payments. Du-Baladad also recommended that denying claims without legal and factual basis should be grounds for administrative cases against the responsible officers.

Economist John Paolo R. Rivera suggested an alternative approach, arguing that equipping the BIR with the necessary skills and infrastructure to efficiently process VAT refunds may be preferable to transferring the mandate. Gatchalian's bill also includes a provision to grant businesses a VAT zero-rating on local purchases if they operate at 70% capacity, aiming to provide additional relief.

As the Philippine government grapples with the issue of delayed VAT refunds, the consensus among experts is clear: stricter accountability measures and penalties for erring revenue officers are crucial to addressing the problem. Whether through transferring responsibilities, improving existing processes, or a combination of both, decisive action is needed to ensure businesses can secure the refunds they are entitled to in a timely manner.

Key Takeaways

  • Economists and tax experts urge Philippine government to impose harsher penalties on internal revenue officers for delayed VAT refunds.
  • Delayed VAT refunds can lead to loss of investor confidence and hinder economic development.
  • Senator Gatchalian's bill proposes transferring VAT refund responsibility from BIR to DoF Revenue Operations Group.
  • Experts suggest stricter penalties, improved processes, and equipping BIR with necessary skills and infrastructure to address delays.
  • Timely VAT refunds are crucial for businesses to maintain cash flow and invest in growth.