Thursday, June 2, 2011

How BIR mitigates tax cheats

Tax Cheats
Bane of tax cheaters: Eastern Pangasinan top tax honcho Atty. Beverly Milo

By Mortz C. Ortigoza

URDANETA CITY – The top honcho of the Bureau of Internal Revenue who oversees Eastern Pangasinan explained the factors how a tax can be imposed to a transaction involving a real property.
Despite her office depending on the old zonal valuation, Atty. Beverly Milo, the Revenue District-6 (RD-6) chief said that her office can used the zonal valuation, tax declaration, and sale value entered in either a place or the transaction by a buyer and seller.
She said that in this troika, her office uses the “whichever is higher” formula that is mandated by the  amended National Internal Revenue Code.
Milo continued that capital gain and documentary taxes are imposed by the BIR on the transaction entered by the vendor and the vendee.
She said capital gain and documentary taxes are 6%, 1.5%, respectively, of the transaction.
“Capital gain tax classified as final gain tax for the responsibility is now on the buyer to collect and pay the tax,” she stressed.
According to an insider at the tax bureau who asked anonymity, the “whichever is higher” formula is a measure resorted by the BIR all over the country because of the tendency of the seller and buyer to collude to declare a manipulated lower amount on their Deed of Sale to avoid paying a higher Capital Gain and  Documentary Taxes.
Milo said the tax agency looks also on the prevailing value of the real property in the area.
Real property is property that includes land and buildings, and anything affixed to the land.
“Lots of factors. Minsan iyong development of the areas. Increase of economic activity that will justify (an increase of taxes), increase of RPT (Real Property Tax imposed by the local government), stagnant iyong lugar na iyon walang improvement, whatever. We have an activity that could justify; was there really a transaction that may increase the market value? Ito na ngayon ang Deed of Sale, iyung mga loans na pumapasaok. Declaration ng mga taxpayers’ ito. Deed of Sale, ito iyung amount that they are willing to sell their property. Loan, ito iyong appraisal ng banko na market value ng property. These are some of the basis why we need to ask for the necessary taxes.”
She said that it is a tall order for her office to collect the P975 million targets given to her by the BIR’s central office. But she was quick to add that she welcomes it.
Last year RD0-6 was given a tax target of P698 million but was able to exceed it by collecting more than P700 million because of the configurations of favorable events.
Milo said that the more than P200 million increases for this year were due to a good collection last year by her predecessor Merlyn Vicente because of the multi-million of pesos flood control projects. The projects were implemented by the national government after the eastern part of the province was gobbled by floods brought by typhoon Pepeng.
One of the factors for last year’s better collection was RD-6 stumbled on a tax delinquent corporation that was able to coughed-up past obligations, surcharges, and interest that ran up to millions of pesos.

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