The government’s anti-red tape campaign spearheaded by the Department of Finance (DOF) has encountered snags following the insistence of the Board of Accountancy (BOA) to require the submission of compilation reports, notwithstanding the decision by the Bureau of Internal Revenue (BIR) to do away with this requirement as part of the attachments to the Income Tax Return s (ITRs) filed by taxpayers.

Because of the submission of these compilation reports, which the BOA insists should be attached to the audited financial statements of businesses despite the new BIR directive, private companies are compelled to hire certified public accountants (CPAs) accredited by the BOA to issue compilation certificates on top of the independent auditor’s certificate already required by the BIR and SEC. Notably, the issuer of the compilation report should not be the independent auditor.
According to DOF Undersecretary Antonette Tionko, submitting these ITR compilation reports have proven to be tedious and costly for small- and medium-size enterprises (SMEs) and could hamper the BIR’s tax collection drive.

“The BOA’s insistence on requiring the submission of the compilation reports is additional red tape and could impede the BIR’s ability to collect taxes, especially now that the Bureau is streamlining and simplifying processes in time for the submission of income tax returns and with many tax filers trying to beat this year’s deadline on April 15,” said Tionko, who heads the DOF’s Revenue Operations Group.

Tionko noted that the compilation reports cannot be prepared by just any CPA but should be done by those accredited by the BOA, which requires them to undergo 120 hours of paid seminars per year.

Last year, the BIR issued Revenue Memorandum Circular (RMC) 21-2016 informing all revenue officials and employees of this BOA resolution requiring the submission of the certified compilation reports, along with the audited financial statements in filing ITRs beginning Dec. 31, 2016.

This circular, however, has already been amended by the BIR with its issuance of RMC 16-2017 last Feb. 22, which states that only the existing documentary requirements in the filing of ITRs will now be required by the Bureau “in line with the government’s thrust on improving ease of doing business and streamlining bureaucratic requirements.”

These “existing documentary requirements” pertains only to the submission of the audited financial statements, and, in certain cases, an attached audit certificate along with the ITR, and does not include the compilation certificate, Tionko said.

Tionko noted that despite the BIR circular, the BOA, in a resolution, pointed out that this requirement is legally allowed under the Philippine Accountancy Act of 2004 and has even warned CPAs to comply with the BOA requirement to avoid facing sanctions.

According to DOF Assistant Secretary Mark Joven, the Philippine Chamber of Commerce and Industry (PCCI) has also complained before the Securities and Exchange Commission (SEC) about the BOA’s requirement of submitting the compilation reports as this was not only “unnecessary and redundant , ” because businesses were already required to submit a duly signed Statement of Management Responsibility together with the financial statement, but also adds to the cost of doing business, especially for SMEs.

Besides the PCCI, small accountancy practitioners and the Philippine Institute of Certified Public Accountants (PICPA) have also sought a temporary restraining order against the other requirements on CPAs imposed by the BOA, he said.

Tionko said the DOF has already relayed its concerns regarding BOA’s refusal to cooperate with the anti-red tape campaign to the Professional Regulation Commission, which has supervision over the BOA.

The DOF and its attached agencies have been at the forefront of the Duterte administration’s anti-red tape campaign with Finance Secretary Carlos Dominguez III last year appointing the Department’s senior undersecretary—Gil Beltran –as its anti-red tape czar.

Beltran’s anti-red tape team has succeeded in reducing the number of documentary requirements in processing applications filed before the BIR and the Philippine Deposit Insurance Corp. and is now working to streamline the processes in securing import and export permits.

Dominguez has likewise instructed the BIR and Bureau of Customs to implement improvements in tax administration to help make the tax system simpler, fairer and more efficient, especially for low- and -middle-income taxpayers.

Cutting red tape and improving the ease of doing business are priority concerns of the Duterte administration in order to attract private investments, stimulate growth and create more jobs.