TAX NEWS - June 2010

Philippines Tax: Tax bureau sets meeting to push toll fee VAT issue

Internal Revenue officials will this week meet with representatives of the Toll Regulatory Board (TRB) and highway operators in an effort to press the implementation of the 12% value-added tax (VAT).

With protracted discussion holding up its plan to charge the tax, officials said the Bureau of Internal Revenue (BIR) would also press its bid to collect over P6 billion in back taxes and was prepared to go to the extent of garnishing the tollway firms' assets if they did not pay up.

"[On] Thursday, there will be a meeting with the TRB and the toll operators to see how things are going and to discuss the assessment of the back taxes," BIR Commissioner Joel L. Tan-Torres said late last week.

The tax bureau, which has wanted to impose the VAT on tolls since 2005, last month notified tollway operators that they owed the government P6.5 billion in unpaid taxes from 2007 to 2009.

Notification letters were sent to Manila North Tollways Corp., Citra Metro Manila Tollways Corp., Star Tollways Corp., Skyway O&M Corp., UEM-MARA Philippines Corp., PEA Tollway Corp. as well as the Bases Conversion and Development Authority which recently awarded a contract to maintain and operate the Subic-Clark-Tarlac Expressway.

Mr. Tan-Torres said the firms had told the BIR they could not pay the tax since it was not charged to tollway users but "It doesn't matter. We have to collect the tax because the VAT has not been implemented. It should have been implemented on April 1."

BIR Deputy Commissioner Nelson M. Aspe said: "There are a lot of remedies. We can issue garnishment orders for their bank accounts and levy on real properties to compel them to pay unless we are prevented by higher authorities or by the court."

Officials of the concerned tollway firms were not immediately available for comment.

The BIR in 2005 issued Revenue Memorandum Circular (RMC) 52 directing the imposition of the VAT on tolls but its implementation was shelved as the TRB said it wanted to determine if the firms could charge the levy, which was then at 10%.

The tax bureau again tried to implement the tax by issuing RMC 72-2009, which upheld RMC 52's validity, last December. The Cabinet, however, stepped in at the start of the year and ordered a deferment.

A fresh order, RMC 30-2010 issued last March, directed the imposition of the 12% VAT starting April 1, with coverage initially limited to private vehicles. A deferment was again ordered, this time by the Finance and Transportation departments, but with an end-April deadline for the TRB to come up with the mechanics for the collection of the tax.

TRB spokesman Julius G. Corpuz, in a text message during the weekend, said: "We cannot ascertain what date and if and when the VAT is finally imposed on toll fees. Discussions among the BIR, TRB and toll operators are still ongoing."

The BIR, which accounts for the bulk of the government's tax revenues, expects to collect P1.3 billion from the scheme.