Toothless Revenue Code allows LGUs to delay tax withheld remittance

Posted at 07/15/2014 7:34 AM | Updated as of 07/15/2014 7:34 AM

MANILA - Local governments are among the most delinquent in remitting withholding taxes to the Bureau of Internal Revenue (BIR), prompting Internal Revenue Commissioner Kim Jacinto Henares to issue a new memorandum order prescribing guidelines on the collection and remittance of withholding taxes.

For the city of Manila alone, the previous administration left a P522-million tax deficiency consisting of taxes withheld from the salaries of employees and payments to contractors of the city.

BIR Revenue Region 6 Director Araceli Francisco said the city had already paid off P126 million of this tax deficiency, representing the basic withholding tax and excluding penalties and surcharges. Francisco said that former president and now Mayor Joseph Estrada had appealed to the BIR to be allowed to pay the basic withholding tax first, while the penalties and surcharges resulting from the late payment will be paid later.

Francisco said it is a common problem that previous administrations of local governments leave behind a huge amount of unremitted withholding taxes from compensation of employees and payments to government contractors.

This is why Henares had issued Revenue Memorandum Order 23-2014 prescribing the obligations of government agencies, bureaus and instrumentalities as withholding agents.

The new circular consolidates the rules on the withholding of taxes by government agencies, and prescribes penalties for the failure to withhold and remit such taxes.

Under the circular and the National Internal Revenue Code (NIRC), the persons responsible for the withholding and remittance of withholding taxes are the chief executive of the local government concerned, the chief accountant and the local treasurer. For other government offices, the persons responsible are the head of the office and the chief accountant or equivalent position.

Failure to withhold and remit such taxes carry the penalties of fine and imprisonment.

Section 272 of the NIRC provides that: “Every officer or employee of the Government of the Republic of the Philippines or any of its agencies and instrumentalities, its political subdivisions, as well as government-owned or -controlled corporations, including the Bangko Sentral ng Pilipinas, which, under the provisions of this code or rules and regulations promulgated thereunder, is charged with the duty to deduct and withhold any internal revenue tax and to remit the same in accordance with the provisions of this code and other laws is guilty of any offense herein below specified shall, upon conviction for each act or omission be punished by a fine of not less than P5,000 but not more than P50,000 or suffer imprisonment of not less than six months and one day but not more than two years, or both.”

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