BIR-Megaworld fiasco reaches ‘way forward’ after House hearing

House Ways and Means Committee Chair Joey Salceda

(File photo)

The House Ways and Means Committee on Monday said it has "reached a way forward" regarding the controversy involving the Bureau of Internal Revenue and Megaworld Corp., particularly on what legislation and tax administration rules are needed to ensure that similar incidents are avoided in the future.

This development came after the panel conducted a briefing for clarification on the Bureau of Internal Revenue's verification of taxes on one-time transactions (ONETT), involving Megaworld Corporation's sale or transfer of properties. The tax verification on Megaworld's ONETT transactions resulted in the BIR's now-suspended closure order.

House Ways and Means Committee Chair Joey Salceda said the committee will recommend to the tax agencies ways to improve procedures on taxpayer dispute, rules on joint ventures (JVs), and matter of jurisdiction.

“There are three main recommendations we are going to forward. First, there is a need for a promulgated common procedure on taxpayer dispute, codifying the rights and responsibilities, as well as timelines and procedures, for resolving taxpayer disputes on jurisdiction, coverage, applicability and other matters," he said.

He also recommended simplifying and finalizing the rules on whether joint ventures should be registered as separate entities for tax purposes.

"The situation seemed to arise primarily out of a confusion as to whether Megaworld or the BCDA should settle the taxes on their joint venture. The best solution is to just require JVs to be registered as separate taxpayers," he said.

On the issue of jurisdiction, he proposed to put all the large taxpayer transactions in the Large Taxpayer Service in the short run, and codify revenue regulations in the long run.

“Third, is the issue of jurisdiction. While I thank the DOF (Department of Finance) for putting a stop to revenue special orders which caused some of the confusion, the suspension isn’t a permanent solution. We need to clarify who is responsible for what, in codified issuances," he said.

Salceda said there are shortcomings on both ends, and that an “all's-well-that-ends-well solution" to this issue is to just make the rules on closures simpler and more harmonized.

“If the rules on Joint Ventures were clear, including their treatment for tax purposes, this would not have happened as well. So, we are recommending clearer rules in that area, too,” Salceda said. “This is the productive, constructive way forward. It also emphasizes the need for a Taxpayer Bill of Rights, as embodied in my proposed Ease of Paying Taxes bill, which is now pending in the Senate."

“Conflict comes out of violated expectations. Both parties had expectations that the other party violated. So, let’s just clarify what the expectations are so we can avoid conflict between tax agency and taxpayer,” Salceda added.

According to BIR Regional Director Eduardo Pagulayan Jr., the order was due to the alleged unregistered joint venture between the Bases Conversion and Development Authority (BCDA) and Megaworld Corporation.

Pagulayan explained that under the tax code, such joint ventures should be registered for proper monitoring whether corporated or unincorporated.

BIR Officer-in-Charge Deputy Commissioner Marissa Cabreros said they are asking Megaworld to open their book of accounts to look into the nature of the agreement, and identify whether it is a joint venture that is taxable or tax-exempt, or whether it is covered by registration requirements by the BIR.

Megaworld Corp. Executive Vice President Kevin Tan in a statement said the corporation has always been tax compliant and that the tax investigation issue has grossly impacted the business and confidence of their investors, as well as causing a sell down since the news became public.

Tan also said there was no audit or due process prior to the release of the Taguig office closure order.

Also, Megaworld Corp. Chairman Andrew Tan said the tax investigation is already a "redundancy," and that the BIR National Office should have performed the audit because the BIR Regional Office is supposed to verify all tax payments before issuing the Certificate Authorizing Registration. (PNA)

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