Bureau of Internal Revenue Commissioner Kim Henares said Tuesday forming a new unit exclusively targeting the rich or high net worth individuals will be difficult to implement and could be abused by tax authorities.
Henares was responding to the suggestion of Finance Secretary Cesar Purisima to put up a new unit that would tax high net worth individuals.
“It is hard to put up a unit for high net worth individuals. There’s a difficulty of doing a high net worth unit because the population keeps moving,” Henares said at the sidelines of the Large Taxpayers Service tax campaign kick-off.
LTS, a unit of BIR targeting top corporations, was assigned a collection goal of P1.23 trillion this year.
Henares said an LTS unit would be more effective, because it targets businesses that continue to book revenues on an annual basis. She said when forming a separate unit for rich individuals, “you have to guard against harassment. We’re talking about individuals here.”
Purisima earlier advised the BIR to put up a high net worth individual unit after the agency failed to meet its LTS collection target. Purisima said high net worth individuals were apparently lagging behind in terms of their tax payments.
“High net-worth individuals are still lagging behind in terms of their share in nation-building, in terms of their share in paying taxes. My proposal is for the BIR to create a high net worth individuals tax payer group,” Purisima said.
“We only have a few months to the next administration [so] this is an idea that we want to leave behind. Maybe we can do the groundwork to set this up,” he said.
Henares said forming the new unit was still possible, but there should be appropriate and well-thought preparations.
“I am not saying it is not possible. I am just saying it has to be well thought of, because there are pros and cons. The pro is that you have one group that is paying attention to that, but the population keeps on moving. And second, you have to put up a lot of safeguards so that people do not abuse,” she said.
Meanwhile, BIR’s LTS collection grew 7 percent in 2015 from a year ago, but failed to meet its P1.05-trillion target collection.
The BIR, which accounts for more than 70 percent of total revenues of the government, said LTS collection missed by 16 percent the P1.05-trillion goal, as only 2,320 companies were registered in the LTS sector.
LTS collection in 2015 grew 6.9 percent to P881.4 billion from P824 billion in 2014. LTS collection accounted for 61.2 percent of the agency’s total collection.
Purisima said the BIR should expand its LTS coverage to improve the country’s revenue collection.
“We need to expand the LTS. This country is not just about 2,000 plus companies. There are more than 2,000 companies that make this economy vibrant, that made it grow by an average of 6.2 percent in the past six years,” Purisima said.
“The challenge for the BIR is to expand the large taxpayers service, by creating a second field,” he said.