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Buffing the VAP
Nov 6, 2001
  

Revenue Regulations No. 16-2001, dated Oct. 25, 2001 but released to the public only on Oct. 30, 2001, is a clear attempt on the part of our internal revenue officials to put a new shine on this administration’s Voluntary Assessment Program. It seems that, despite its logical and theoretical superiority over ERAP, its counterpart under the previous President, the VAP, notwithstanding a prior extension, has not been availed of by as many taxpayers as the government projected. Like a product staying too long in the shelf, the VAP seemed in need of some polishing to make it more attractive.

The impact on the cash flow of Philippine taxpayers of the Sept. 11, 2001 terrorist attacks at the World Trade Center in New York at the Pentagon in Washington is, according to the new regulations, responsible for the lack-luster performance of the VAP. Therefore, two major amendments were made on the program: first, taxpayers were given a longer period within which to take advantage of the offer of last priority in tax audit and investigation; second, payment of the amnesty amount, if in excess of P5,000,000 need not be in one lump sum.

The period for availing oneself of the VAP, which was originally to have ended on Sept. 30, 2001 and then, per Revenue Regulations No. 10-2001, to have lasted until last Wednesday (Oct. 31, 2001) was further extended to Dec. 15, 2001. Presumably, after that date, everyone would have the time or the inclination to attend to taxes.

In addition, the VAP amount, if over P5,000,000 but not more than P10,000,000 may be paid in two installments, 50 percent down, i.e. time of filing, the other half one month thence. If the VAP amount is over P10,000,000, then the taxpayer may pay one-third, upon filing, another third at the end of the first month thereafter, and the last third at the end of the second month.

These modifications would probably be enough if the problem taxpayers see with the VAP were simply a matter of cash flow. Unfortunately, for most, Sept. 11, 2001, affected not just the flow of cash but, more important, the amount itself of cash or income earned by taxpayers. In other words, beyond cash flow, the problem is the amount of money that the taxpayer must cough up for the offered privilege of last priority in audit and investigation.

The formula, which fixes the VAP amount at the highest of three figures (which in the income tax, for example, are, except for the minimum fixed at P50,000 and P10,000 for corporations and individuals respectively, related to the entire gross sales of the taxpayer and not just on the unreported gross) results in very large VAP payments. As a consequence, some taxpayers, who had been cheating on their taxes, would rather take the chance on being audited by a corrupt examiner who can then be persuaded, at the cost of only a small portion of the amount that the VAP requires, to look the other way. At the same time, the law-abiding others, who have hidden nothing and therefore have nothing to hide, consider the VAP payment required to be too much to spend for last priority status. The difficulty of earning money in these hard times make "peace of mind," on the part of both types of taxpayers, an expensive luxury.

Perhaps, the government should reassess the VAP formula and adopt caps on the two figures that are related to gross sales. How about, just for discussion, simply the incremental tax that would have been paid had the proper amounts of income been reported or the deductions claimed not padded? That would be equivalent to only extending the time for payment of the tax.

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