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The novel 2019 coronavirus (COVID-19) pandemic has threatened the lives of millions of people. While many have recovered from the virus, it has still resulted in numerous deaths on account fast spread of the virus because of its airborne nature. This pandemic has also brought about an increase in the implementation of work-from-home arrangements. The work-from-home arrangements provides a balance of the interests of the employee and the employer: the employee is able to practice self-care by staying at home while working to earn; and the employer is able to continue its business by allowing its employees to work in the safety of their homes. This shared responsibility creates a win-win situation for both parties.

This win-win situation is also manifested with the Department of Finance’s issuance of Revenue Regulations 21-2020 (RR 21-2020), known as the Voluntary Assessment and Payment Program for Taxable Year 2018 (VAPP). Voluntary Assessment and Payment Program (VAPP) is aimed at collecting additional tax revenues “which could otherwise be collected through audit and enforcement effort.”

RR 21-2020 shall apply to all internal revenue taxes covering the taxable year ending December 31, 2018, and fiscal year 2018 ending on the last day of the months of July 2018 to June 2019, including taxes on one-time transactions (ONETT) such as estate tax, donor’s tax, capital gains tax (CGT), as well as ONETT-related creditable withholding tax (CWT)/expanded withholding tax and documentary stamp tax (DST).

Persons disqualified to avail of VAPP are taxpayers who have already been issued a Final Assessment Notice (FAN) that have become final and executory on or before the effectivity of RR 21-2020, persons under investigation under Section 282 of the NIRC of 1997, those with cases involving tax fraud filed and pending in the Department of Justice or in the courts, and those with pending cases involving tax evasion and other criminal offenses.

A taxpayer may avail of the benefits of VAPP by applying and submitting the requirements mentioned in the said Regulations. If qualified, a Certificate of Availment shall be issued to the taxpayer-applicant which shall serve as proof of the availment of the VAPP, compliance with the requirements, and entitlement to the privilege granted under the said Regulation. The taxpayer duly issued with a Certificate of Availment shall not be audited for 2018 for the tax types covered by the availment. However, a Certificate of Availment shall be rendered invalid when, upon prior authorization and approval of the Commissioner of Internal Revenue, there is strong evidence or findings of under-declaration of sales, receipts or income or overstatement of deductions by more than 30%, and/or there is verifiable information that the taxpayer has withheld but failed to remit withholding taxes.

Taxpayers whose availment is found to be invalid, deficient or defective are not entitled to the privilege under these Regulations. However, they may apply the voluntary payments made against any deficiency tax liability for the taxable year 2018, in case of audit/investigation.

Qualified persons can avail of the benefits of the VAPP until December 31, 2020, unless extended by the Secretary of Finance. The voluntary payment should be in cash as a condition to avail of the privilege.

With VAPP, the taxpaying public is granted the opportunity to help defray the increased expenditures of the Government during this pandemic through voluntary payment of additional tax under the VAPP for the covered period, with or without an audit/investigation, and be entitled to the privilege under RR 21-2020. The availment of the VAPP provides benefits both the taxpayer and the BIR: the taxpayer may be exempt from audit investigations for the given period under VAPP; and, the BIR maximizing revenue collection with the least administrative costs by reducing the number of BIR audit investigations. In this manner, taxpayers, both individuals and corporations, may be able to continue their work/business sans the adverse effects of this time of pandemic. By availing of the VAPP, taxpayers may be relieved from or minimize the inconvenience of tax audits, at least, for 2018. In the same vein, the BIR would be able to focus on other audit investigations which require most of their time. This also encourages tax compliance, benefitting both taxpayer and BIR officials.

The BIR’s VAPP creates a win-win situation both for taxpayer and the BIR. Taxpayers availing of VAPP who voluntarily assess and pay their taxes for the period covered under the program are given the benefit of the doubt by the BIR, meaning they are stripped off from the BIR’s list of audit investigations because of their initiative to comply with their tax obligations. Moreover, they are relieved from the aggravation of numerous documents as a result of the said BIR audit. BIR will also benefit from said program as the privilege of “no audit investigations” given to the taxpayers availing of the VAPP allows them to focus and concentrate on more serious audit investigations. Also, with taxpayers paying cash for purposes of the VAPP, the BIR’s collections are secured as they continue to generate revenue for the collection of taxes from the taxpaying public. As the lifeblood theory of taxation states, the existence of government is a necessity; that government cannot continue without means to pay its expenses; and that for these means it has a right to compel its citizens and property within its limits to contribute. Taxes are the lifeblood of the government, being such, their prompt and certain availability is an imperious need1. Moreover, taxes are the lifeblood of the nation through which the government agencies continue to operate and with which the state effects its functions for the welfare of its constituents.2

1 CIR v. Pineda, 21 SCRA 105

2 CIR v. CTA, 234 SCRA 348

Shirley Marie D. Cada is a Supervisor from the Tax Group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email ph-kpmgmla@kpmg.com.