Bureau of Internal Revenue to lose P6 billion due to optional deduction
By Iris C. Gonzales
(The Philippine Star) Updated March 12, 2010 12:00 AM
MANILA,
Philippines - The Bureau of Internal Revenue (BIR) expects to lose up
to P6 billion this year from the Optional Standard Deduction privilege
allowed under RA 9504 or the Minimum Wage Law.
OSD
allows corporations and individuals a 40-percent maximum deduction on
gross sales or gross receipts in the case of self-employed and
professionals and a standard deduction of not more than 40 percent on
gross income for corporations. The deduction would result in a reduction
in income tax obligations to the BIR.
The
system was put in place, supposedly to simplify the filing of income-tax
returns and benefits for professionals and micro, small and medium
entrepreneurs. It was also designed to encourage businesses in the
underground economy to pay taxes.
However, according to the BIR,
the revenue losses of P6 billion would leave a huge dent on state
coffers. As such, the BIR is pushing for an amendment in the reduction
of OSD for corporations from 40 percent to 10 percent.
The
P6 billion estimated foregone revenue is higher than the previous
estimate of P4.1 billion.
As part of the implementation of
the OSD provision, the BIR issued Revenue Memorandum Circular 16-2010 to
remind taxpayers of the requirement to disclose their option to avail
of the 40 percent OSD provision for taxable year 2009 which is due to be
filed or paid for this year.
BIR Commissioner Joel Tan-Torres
said that if the taxpayer decides to use OSD it should be used for the
succeeding quarterly returns and in the final ITR for the taxable year.
The decision to avail of the OSD as signified in the return shall be
irrevocable for the taxable year 2009, he also said.
He
also said that taxpayers who choose to avail of the OSD are required to
indicate whether they are adopting a calendar or fiscal period.
Furthermore, Tan said, failure to indicate the decision to use OSD would
be considered as having availed of the Itemized Deduction or the other
option in computing gross sales and receipts.
Newly-registered
taxpayers should also disclose their election to avail of the OSD in
their initial quarterly income tax return which is required to be filed
for the taxable year 2009.
Bureau
of Internal Revenue to lose P6 billion due to optional deduction