Enforcement of collection
Towards the end of 2008, the credit crunch that sparked panic around the globe had
become a full-blown recession for some of the world’s most powerful countries. The
global slowdown continues into 2009, with many pundits warning that things will get
worse before they get better. Left and right we hear of business closures or cessation of
operations, bankruptcy and increased rate of unemployment all over the world. If left
unchecked, this downward spiral might leave us trapped and unable to recover from a
worldwide economic depression.
To remedy the situation, governments have resorted to takeovers, bailouts and more government spending. Sadly, however, controversies have accompanied the so-called solutions to the economic crisis, much to the anger and disappointment of the taxpayers, who are the source of government money.
In the Philippines, although takeovers, bailouts and more government spending are still unheard of, it may not be too long before our government resorts to these tactics. To do this, however, it is important for the Bureau of Internal Revenue (BIR) to meet its revenue collection target. One of the ways the BIR enforces collection is by issuing warrants of distraint/levy and/or garnishment on delinquent accounts. It may be recalled that in 2007, the BIR issued Revenue Memorandum Order (RMO) No. 30-07, which was intended to convert the long standing delinquent accounts into revenue through the issuance of warrant of distraint/levy and/or garnishment on delinquent accounts.
The RMO calls for the full utilization of the summary remedies provided for by Sec. 207 of the 1997 Tax Code, as amended, by issuing a warrant of distraint/levy and/or garnishment on all delinquent accounts that are still pending with the various BIR offices, to be signed and approved by the concerned BIR official based on prevailing Revenue Delegation Authority Orders. Upon issuance, revenue officers in charge of collection should immediately identify the properties and specific accounts owned by and in the name of the taxpayer that shall be levied, forfeited, seized or garnished in favor of the government. Then, a Notice of Tax Lien and Notice of Levy shall be sent out to place
Towards the end of 2008, the credit crunch that sparked panic around the globe had
become a full-blown recession for some of the world’s most powerful countries. The
global slowdown continues into 2009, with many pundits warning that things will get
worse before they get better. Left and right we hear of business closures or cessation of
operations, bankruptcy and increased rate of unemployment all over the world. If left
unchecked, this downward spiral might leave us trapped and unable to recover from a
worldwide economic depression.
To remedy the situation, governments have resorted to takeovers, bailouts and more government spending. Sadly, however, controversies have accompanied the so-called solutions to the economic crisis, much to the anger and disappointment of the taxpayers, who are the source of government money.
In the Philippines, although takeovers, bailouts and more government spending are still unheard of, it may not be too long before our government resorts to these tactics. To do this, however, it is important for the Bureau of Internal Revenue (BIR) to meet its revenue collection target. One of the ways the BIR enforces collection is by issuing warrants of distraint/levy and/or garnishment on delinquent accounts. It may be recalled that in 2007, the BIR issued Revenue Memorandum Order (RMO) No. 30-07, which was intended to convert the long standing delinquent accounts into revenue through the issuance of warrant of distraint/levy and/or garnishment on delinquent accounts.
The RMO calls for the full utilization of the summary remedies provided for by Sec. 207 of the 1997 Tax Code, as amended, by issuing a warrant of distraint/levy and/or garnishment on all delinquent accounts that are still pending with the various BIR offices, to be signed and approved by the concerned BIR official based on prevailing Revenue Delegation Authority Orders. Upon issuance, revenue officers in charge of collection should immediately identify the properties and specific accounts owned by and in the name of the taxpayer that shall be levied, forfeited, seized or garnished in favor of the government. Then, a Notice of Tax Lien and Notice of Levy shall be sent out to place
such identified properties under seizure/forfeiture/garnishment as a consequence of the
failure on the part of the taxpayer to pay the delinquency taxes. All revenue officers in
charge of this function shall thereafter ensure that proper annotations are made unto the
document evidencing the ownership of the taxpayer over such pieces of
property/accounts. After which, the sale of the distrained property in accordance with
existing rules and regulations will follow unless full payment of the delinquency taxes is
received from the taxpayer. Additionally, the BIR also issued RMO 39-07 which deals
with issuance of warrants of distraint and garnishment, and/or levy on disputed
assessments finally decided by the bureau against the taxpayer on assessments upheld
by the Court of Tax Appeals.
In a recent development, the BIR came up with draft regulations providing the policies, guidelines and procedures in the handling of accounts receivable/delinquent accounts. One of the highlights of the draft regulations is provided in Sec. 5 prescribing the procedure in enforcing the collection of collectible delinquent accounts. According to the draft regulations, if a taxpayer fails to make payment, he will be issued and served a Preliminary Collection Letter, which will be followed ten days later by a Final Notice Before Seizure. The draft provides for the issuance and service of the Warrant of Distraint and/or Levy upon the taxpayer’s properties, the value of which is sufficient to cover the liability. The warrant shall be executed within 30 days after the expiration of the time prescribed in Sec. 207 of the 1997 Tax Code, as amended.
It is interesting to note that the draft identifies the items upon which the Warrant of Garnishment may be issued which is not limited to the banks where the delinquent taxpayer may possibly maintain bank accounts but may also be applied to the delinquent taxpayer’s compensation income from his employers and to the taxpayer’s receivables from contracts and similar agreements with the private and government sectors.
As provided in the draft, the BIR, through its Revenue District Offices (RDOs) and other offices, shall also inquire on the taxpayer’s property holdings, real or personal, and cause the issuance and filing of the Notice of Tax Lien/Encumbrance upon the delinquent taxpayer’s properties registered in his name, with the listed government agencies. In the case of a real property registered in the name of the delinquent taxpayer, a Notice of Levy shall be issued and filed with the concerned Register of Deeds or Assessors Office. For the taxpayer’s personal property, a Notice of Actual Seizure of Personal Property shall be issued and the personal property shall immediately be seized following the procedures in the collection manual. Then, the Notice of Sale of real/personal property levied/distrained shall immediately be published and the sale shall be conducted through a public auction in the manner prescribed under existing revenue issuances. In case there are no qualified bidders or no bidders at all, a Declaration of Forfeiture shall immediately be issued and filed with the concerned Register of Deeds to transfer the title of the property to the Republic of the Philippines after the lapse of the redemption period.
In the event that the summary remedies provided for in the draft have been fully exhausted to no avail before the expiration of the five-year period to collect, the docket of the case shall be referred to the Legal Service Division for the filing of civil or criminal action against the taxpayer or the responsible officers of a corporation or partnership.
It must be stressed, however, that the foregoing revenue regulation remains a draft, subject to revisions. Thus, prior to its enforcement, the procedure currently being
In a recent development, the BIR came up with draft regulations providing the policies, guidelines and procedures in the handling of accounts receivable/delinquent accounts. One of the highlights of the draft regulations is provided in Sec. 5 prescribing the procedure in enforcing the collection of collectible delinquent accounts. According to the draft regulations, if a taxpayer fails to make payment, he will be issued and served a Preliminary Collection Letter, which will be followed ten days later by a Final Notice Before Seizure. The draft provides for the issuance and service of the Warrant of Distraint and/or Levy upon the taxpayer’s properties, the value of which is sufficient to cover the liability. The warrant shall be executed within 30 days after the expiration of the time prescribed in Sec. 207 of the 1997 Tax Code, as amended.
It is interesting to note that the draft identifies the items upon which the Warrant of Garnishment may be issued which is not limited to the banks where the delinquent taxpayer may possibly maintain bank accounts but may also be applied to the delinquent taxpayer’s compensation income from his employers and to the taxpayer’s receivables from contracts and similar agreements with the private and government sectors.
As provided in the draft, the BIR, through its Revenue District Offices (RDOs) and other offices, shall also inquire on the taxpayer’s property holdings, real or personal, and cause the issuance and filing of the Notice of Tax Lien/Encumbrance upon the delinquent taxpayer’s properties registered in his name, with the listed government agencies. In the case of a real property registered in the name of the delinquent taxpayer, a Notice of Levy shall be issued and filed with the concerned Register of Deeds or Assessors Office. For the taxpayer’s personal property, a Notice of Actual Seizure of Personal Property shall be issued and the personal property shall immediately be seized following the procedures in the collection manual. Then, the Notice of Sale of real/personal property levied/distrained shall immediately be published and the sale shall be conducted through a public auction in the manner prescribed under existing revenue issuances. In case there are no qualified bidders or no bidders at all, a Declaration of Forfeiture shall immediately be issued and filed with the concerned Register of Deeds to transfer the title of the property to the Republic of the Philippines after the lapse of the redemption period.
In the event that the summary remedies provided for in the draft have been fully exhausted to no avail before the expiration of the five-year period to collect, the docket of the case shall be referred to the Legal Service Division for the filing of civil or criminal action against the taxpayer or the responsible officers of a corporation or partnership.
It must be stressed, however, that the foregoing revenue regulation remains a draft, subject to revisions. Thus, prior to its enforcement, the procedure currently being
observed with respect to the issuance of warrants of levy, distraint or garnishment
remains in force. (Atty M.N. Francisco)
No comments:
Post a Comment