MANILA - The Bureau of Internal Revenue (BIR) yesterday admitted that the impact of tropical storm Ondoy could put a dent on its collections and may warrant a reduction in its targets for the year.

BIR Deputy Commissioner Nelson M. Aspe noted in a phone interview that firms whose production was disrupted due to the floods, would likely declare lower earnings, hence, pay less tax.

The Philippine Chamber of Commerce and Industry Inc., which is surveying firms in Metro Manila and outlying provinces for damage they incurred due to floods spawned two weeks ago by Ondoy, said last week that initial assessments showed such cost had already reached P1 billion.

Impact

Metro Manila accounted for nearly 30% of tax collections last year, BIR data show.

"The storms will have an impact on our collections. Many businesses were affected. Some firms incurred losses. Businesses whose factories or warehouses were damaged experienced disruptions in their production," Mr. Aspe said.

When asked if the BIR can still attain its P798.5 billion goal this year, Mr. Aspe said: "I think there should be an adjustment."

He did not cite specific figures saying that the decision to trim targets would depend on the Finance department.

Taking stock

Mr. Aspe, who heads the bureau’s operations group, said his office has asked revenue units to assess the damage incurred by taxpayers within their jurisdiction. The report will be submitted to the Finance department.

"We already gave them a memorandum. We asked every district to conduct the assessments," he said.

Mr. Aspe said the tax code allows losses caused by natural calamities and other disasters to be treated as income tax deductions. Specifically, Chapter VII, Sec. 34 of the Tax Reform Act of 1997, states that losses "actually sustained during the taxable year and not compensated for by insurance or other forms of indemnity" can be allowed as deductions.

To qualify as deductions, such losses from fires, storms, shipwreck and other disasters should have been incurred in relation to trade, profession or business.

Businesses that incurred such losses should submit documentary evidence to prove that such can be treated as allowable deduction.

Mr. Aspe said while the bureau expects earnings of some sectors such as groceries to increase, these may not be offset by the long-term negative impact of the storm damage.

"Earnings of groceries and those who sell rice may increase due to panic buying. But this occurrence is only momentary," he explained.

Hard-pressed

Mr. Aspe said this means the bureau will have to intensify its enforcement and improve its efficiency.

Even the operations of BIR were disrupted by the storm, as the bureau has been forced to suspend indefinitely the implementation of "Oplan Kandado" in affected areas.

The suspension, which took effect last Oct. 2, was done to allow businesses to undergo rehabilitation and to encourage BIR personnel to participate in relief efforts.

"Oplan Kandado" temporarily suspends the operations of businesses found with unpaid tax dues. The program has so far padlocked more than 240 businesses since it was launched in January.

The BIR, which accounts for around three-fourths of state tax revenues, missed its P810-billion target last year, collecting only P778 billion.

It had collected P500.8 billion as of end-August, down from last year’s P532.1 billion, on the back of a slower economy.