Today, digital transformation continues to generate a big fuss among policymakers, government agencies, and sectoral leaders due to its societal impact. As digitalization disrupts society ever more profoundly, concern is growing on how it affects issues such as jobs, wages, inequality, health, resource efficiency and security. Nevertheless, we are all aware that it has a positive effect, especially in this time of pandemic.
Because of mobility restrictions as one of the means to prevent the danger that COVID-19 imposes, the direction of digital transformation greatly favors the people that have transactions with different government agencies, such as the Bureau of Internal Revenue (BIR). This will lessen the burden of actually going to BIR offices to process tax compliance requirements.
Let’s have a look at some of the BIR’s digitalization initiatives that taxpayers need to know about.
BIR DX Program Update
As of March 2022, the BIR has successfully completed and implemented fifteen (15) out of the forty-nine (49) projects under the first phase of its 10-year Digital Transformation (DX) Roadmap. In addition, nine (9) DX projects have recorded significant accomplishments while others are continuously being improved/developed. This ongoing program has expanded the range of electronic payment channels that allow taxpayers to file and pay their taxes online and which promote the ease of filing and paying their taxes amid the restrictions that have been put in place during the pandemic.
The BIR is continuously developing and improving its systems and procedures to efficiently accommodate the needs of all taxpayers and their employees. Among the digitalization initiatives already launched or implemented by the BIR are:
- Internal Revenue Integrated System (IRIS) – The BIR’s central tool and repository to process taxpayer information;
- Enhanced Internal Revenue Stamps Integrated System (IRSIS) – An application that manages the ordering, production, distribution, affixing and tracking of revenue stamps to monitor the proper payment of excise taxes on tobacco products;
- Taxpayer Identification Number (TIN) mobile application – A mobile chat application available to public for their taxpayer identification number (TIN) inquiries and verification;
- REVIE – A single hotline number and Chatbot in its website to assist taxpayers with general inquiries, on top of being able to email the bureau regarding their concerns.
- Electronic Filing and Payment System (eFPS), Electronic Fund Transfer Instructions System (eFTIS), and other e-payment channels to allow taxpayers to settle taxes online;
- Electronic One-Time Transaction System (eONETT System) – A system that enables taxpayers to transact their ONETT online anytime, anywhere;
- New business registration or NewBizReg Portal – An electronic registration portal that lets taxpayers submit their applications for business registration through email; and
- eAppointment - An online or digital medium accessible at the BIR website that taxpayers may use to book or request for schedule of meeting/conference with revenue officers/officials regarding matters on taxation.
These are just some of the BIR’s projects that support the objectives of the Republic Act (RA) No. 11032, otherwise known as “An Act Promoting Ease of Doing Business and Efficient Delivery of Government Services.”
Electronic Signatures (e-Signatures)
The traditional function of a signature is to permanently affix to a document a person's uniquely personal, undeniable self-identification as physical evidence of that person's personal witness and certification of the content of all, or a specified part, of the document. This is a very significant element of a document for submission to government agencies, including the BIR. Because of this, some BIR offices are still hesitant to accept any returns and documents signed using e-signatures only.
To give clarity and provide ease to taxpayers, the BIR has recently issued Revenue Memorandum Circular (RMC) No. 40-2022 and RMC No. 42-2022 reiterating the provisions under RMC No. 46-2021 on the use of e-Signature as deemed equivalent to an actual signature or wet signature for filing purposes, pursuant to Section 6 to 13 of R.A. No. 8792, otherwise known as the “Electronic Commerce Act of 2000” –an act that gives legal recognition of electronic data messages, electronic documents, and electronic signatures.
RMC 40-2022 has a clear-cut provision that using e-Signatures, in lieu of wet signatures, is now acceptable for tax returns purposes. Hence, affixing signatures will be easier.
However, many taxpayers are still waiting for the BIR’s clarification as to the extent of the coverage of its acceptance of using e-signatures. RMC 42-2022 provides that “all tax returns, attachments and documents can be signed by the taxpayer or its authorized officer or signatory through an electronic signature. Such electronic signature shall be deemed equivalent to an actual signature or 'wet signatures' for filing purposes.” RMC, 40-2022, on the other hand, provides that “the use of Electronic Signature applies to all tax returns, attachments and documents required to submit AITR and returns”. Both RMC 42-2022 and 40-2022, however, deal with the filing of income tax returns and use of Electronic Audited Financial Statement System (eAFS), respectively. Hence, there is a confusion on whether the e-Signature may also be allowed for filing of reply/protest related to assessments or other official communications with the BIR.
Electronic Audited Financial Statement (eAFS) System
It has been the BIR’s practice to adhere to the traditional process of tax compliance. Taxpayers spend long hours of waiting to process tax compliance requirements. One best example is the submission of the Annual Income Tax Return (AITR) attachments.
Before the COVID-19 outbreak, taxpayers were required to file their AITRs together with the required attachments to the respective BIR offices where they are registered. In line with the agency’s digitalization initiatives, the BIR issued RMC No. 49-2020 to suggest the use of the online facility called “eAFS” as one of the options of taxpayers in the submission of their filed AITRs and the required attachments. The submission of attachments to the returns was made easy with the Bureau’s eAFS System.
Since the abovementioned RMC was issued for the processing and filing of 2019 AITRs and their attachments, many were unsure if the eAFS system can be used as well for the succeeding taxable years. The BIR issued RMC No. 46-2021 to reiterate the availability of the eAFS facility as an option in submitting the electronically filed AITR and its attachments but the circular was applicable for the taxable year 2020 only.
To end this uncertainty, the BIR clarified that the submission of AITRs and attachments via eAFS is applicable to any taxable year and all succeeding fiscal and/or taxable years as provided under RMC 40-2022.
With the shift to contactless transactions, more taxpayers are electronically filing their returns and other documents with the BIR.
Adapting to an Electronic World
Digitalization transformation really is a big relief for most taxpayers during this pandemic. On the other side of the coin, there are some taxpayers who are still not adapting to this newborn electronic world as seamlessly as others. Some are having a hard time learning the process, while some are not privileged enough to have access to gadgets and equipment use for electronic transactions. This may be one of the reasons why the BIR still uses manual processing.
Considering that digital transformation is still in progress, some questions are yet to be answered. Is the BIR going full blast digital soon? Will all BIR offices accept electronic copies of documents during the course of their tax audits in the near future? What are the succeeding projects that the BIR will implement after the DX program? We all hope that the solutions to these woes will benefit both the BIR and the taxpayers.
Let's Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.
As published in BusinessWorld, dated 03 May 2022