Press Release
April 19, 2006

*Oversight body clarifies news reports on BIR-PDIC compromise*

The Congressional Oversight Committee on Comprehensive Tax Reform Program (COCCTRP) clarifies previous reports in various newspapers that it is questioning the BIR-PDIC compromise and is telling the BIR to collect all of PDIC's alleged back taxes.

It was earlier reported that PDIC and the BIR signed a memorandum of agreement concerning PDIC's VAT liabilities. The issue involves the taxability of PDIC, a state insurance company, for VAT purposes. Under the said agreement, PDIC reportedly agreed to pay P1.5 billion regardless of the outcome of the case plus an additional amount in case it is resolved against it.

The COCCTRP said that while it is aware of the P1.5 billion compromise deal between the BIR and the Philippine Deposit Insurance Corporation (PDIC) as the same was reported in the papers, it has not received yet from the BIR a report of the list of cases subjected to compromise for the year 2006.

It noted that under Section 204 of the Tax Code, the BIR Commissioner is required to submit to the COCCTRP a report on the exercise of his powers to compromise every six (6) months of each calendar year. Upon receipt of the BIR report, it is within its oversight powers to determine if the power of the BIR Commissioner to compromise is reasonably exercised. As of this date, therefore, it is early to state that it already is "questioning" the said deal, it added.

The COCCTRP said that the news reports seem to have misconstrued its oversight role in the BIR-PDIC compromise deal. It stated that Section 204 of the Tax Code clearly authorizes the BIR Commissioner to compromise the payment of any internal revenue tax if:

(1) a reasonable doubt as to the validity of the claim against the taxpayer exists; or

(2) the financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.

In the latter instance, the Tax Code imposes a minimum of 10% compromise rate. The minimum compromise rate in all other cases is 40%. Moreover, the BIR has issued guidelines to implement the said provision.

On the other hand, Section 290 of the Tax Code granted oversight powers to Congress through the creation of the COCCTRP. This is a new feature introduced in the Tax Code of 1997. Under the said provision, the COCCTRP shall, among others, in aid of legislation:

* Monitor and ensure the proper implementation of Republic Act No. 8240;

* Determine that the power of the Commissioner to compromise and abate is reasonably exercised;

* Review the collection performance of the Bureau of Internal Revenue; and

* Review the implementation programs of the Bureau of Internal Revenue.

In a statement, it said that any actions of the COCCTRP concerning the review of the various compromise agreements entered into by the BIR with taxpayers (not only that of PDICs case) should be understood in line with the above mandate. It said that as far as the power of the BIR Commissioner to compromise is concerned, its oversight function under the Tax Code is to the determine whether or not the power of the BIR Commissioner to compromise and abate is reasonably exercised and that the Government is not unduly deprived of revenues.

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