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Last Wednesday, Jan. 23, I represented the Makati Business Club in a consultation meeting called by BIR Commissioner Rene Banez on the draft regulation imposing a ceiling on the entertainment, amusement and recreation expenses that may be claimed as deductions from the gross income of a taxpayer in business. The consultation was attended by the usual suspects, i.e., tax practitioners representing various trade and professional organizations such as the MAP, FINEX, PCCI, PICPA, various business chambers, and, of course, the Tax Management Association of the Philippines (TMAP).

Since the proposed regulation seeks to restrict the right of the business taxpayer to claim what is usually called representation expenses from its gross income, it in effect, increases the amount that is subject to the income tax. By the same token, it puts an end to the current regime where the government effectively shares to the extent of about 32 percent of the amounts spent by a taxpayer in entertaining, amusing, and indulging his client in recreation. With such a subject that threatens the pocket books of those in business and with an attendance that is predominantly pro-business, one would think that sparks would fly, screams would be heard, and blood, figuratively if not literally, spilled.

But, lo and behold, the wolf cavorted with the lamb; the leopard grazed with the goat; and the calf and the lion’s cub fed in the same lush meadow. Disarmed by Deputy Commissioner Edmundo P. Guevara’s plea for cooperation and assistance, the group, save for token resistance raising the prudence of issuing the measure at the present time and the correctness of the original proposal (which to my mind was never seriously meant by the Bureau) to deny outright 50 percent of the substantiated expenses, proceeded to discuss the more meaningful issue of how to set different ceilings for the various segments of industry and business.

By the time Commissioner Banez assumed the chair (after hopping from the two other consultation hearings that were being conducted simultaneously the same morning), a consensus was already in the offing. A private-public sector ad hoc committee, under the co-leadership of the TMAP, represented by its current president, Ms. Bi Yong Chungunco and Atty. Edwin Abella, head of BIR’s large taxpayers group, would oversee the conduct by the various industry and business associations of a survey of its members for the purpose of determining the appropriate level of allowable representation expenses for each type of business following the SEC classification. The ad hoc committee, whose membership is open to those interested, is to be aided by a well-known opinion pollster in formulating the survey questions, assessing the results, and, possibly, sounding off the hoi polloi’s sentiments on such a technical issue. The entire process, from the industry consultations to the issuance of the regulations, is expected to be finished by the first quarter of this year.

What is noteworthy about the consultation meeting is not that the Bureau of Internal Revenue is finally seeking to minimize the leakage in government collection attributable to what may be the most abused provision in the tax code. Signs of the eventual closure of that loophole were already apparent when the Comprehensive Tax Reform Act gave the Secretary of Finance the authority to fix the ceiling. I, for one, have long believed, that, philosophically, there was no justifiable reason for requiring the government to foot part of the bill of a taxpayers’ expenses which, by nature, are personal. And therefore, the representation expense as a deduction from gross income was near its demise.

What is noteworthy was the milieu of cooperation under which the tax collector and the taxpayer agreed to find common ground. It may, of course, just have been a hangover from the Christmas season just ending (in the Philippines we celebrate Christmas until Valentine’s Day). But regardless, it was a refreshing sight for my fading vision to hear the tax collector ask the taxpayer how much it was the latter thinks was a reasonable amount of blood the former could extract. If indeed, this augurs the protagonists’ swords soon being turned to plows, then perhaps, this country, after all, would be a good place for my granddaughter to grow up in.

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