PROBLEMS OF REVENUE ADMINISTRATION 1.The lack of “tax handles” 2.The assessment of revenue administration
Illustrative Examples: The administration of business taxes is severely hampered by the inability of the tax administrator to assess reliably and validly the volume of sales that the business establishments has. This is because the businessman may not divulge all information relevant for tax assessment and collection. There may not account records kept. Taxing multinational corporations (MNC’s) also becomes difficult when there is manipulation of accounting and other information and other evasive tactics like “transfer pricing”. Inadequacy.ies in the accounting systems and procedures prevent the generation of data that can provide a valid and reliable basis for effectively taxing the business activities of foreign corporations.
Problems of tax handles: Inability of the account ting field of study and practice to meet the needs of tax administration. Reasons: 1. Lack of accounting information 2. inadequate to supply the information actually needed by tax assessment and collection. 3. Willful neglect or evasion on the part of the business in question 4. Collusion of the tax payer and the members of the accounting profession Lack of socioeconomic data which can provide a valuable basis for the design of tax systems and schemes. Example of socioeconomic information desired but inadequately gathered: Assets and liabilities Per capita income Expenses and disabilities
These informations are particularly important for direct taxation such that the ability to pay, uniformity and equitability principles of direct taxation are achieved. A case in point is the perceived flaw in the gross income taxation scheme where it is believed that the scheme is too stiff for the middle income class. The elimination of the deduction previously allowed under the old scheme and the new applicable rates obviously did not take into account “the way of life of the people who are deemed to fall under the middle – income category. Example: school expenses, house rent and amortizations, the average number of earning members of typical middle class family factors, may not have been accounted for in formulating the scheme.
II. ASSESSMENT OF REVENUE ADMINISTRATION An important part of revenue administration which remains inadequately performed is the conduct of: Performance audit, like audit of agency operations, if done.objectively and oriented towards problem – solving can provide useful information as a basis for the improvement of revenue administration. Fiscal audit, like revenue audit can assist the tax administrator in the identification, analysis and solution of the problems behind the administration of tax policies and system. Revenue audit examines all income derived from the regular system taxation (revenue) including the cash inflows realized from the operations and activities of the government or received by it in the exercise of its corporate functions (receipts). Approached on a post – audit basis, revenue audit will look at the regularity and completeness of collection, the accuracy of recorded and reported amounts, the deposit of collections, their proper classification and the adequacy of controls over revenue accounts. It is the Commission on Audit that conducts revenue audit. Thus far, revenue audit has not been substantially performed to the extent that it has maximally benefitted our tax system.
FOUR COMPONENTS OF THE REVENUE ADMINSTRATION SYSTEM: Assessment Collection Remittance/deposit Recording
ASSESSMENT In the Bureau of Internal Revenue assessment or tax audit is conducted by the Revenue District Office after income tax returns have been filed and corresponding taxes have been paid. Dockets of reports of investigation include a duly accomnplished “Revenue” Officer’s Audit Report”, which is submitted to and reviewed by the Assessment Division in the Revenue Regions for regional cases f ailing within their respective jurisdiction, and by the Intelligence and Investigation Service for cases failing under the Tax Fraud Division.
In the Bureau of Customs, assessment is done before payment of taxes and duties, and release of the goods. The assessment division /unit are responsible for ensuring that revenues are properly assessed. Assessments made by the tax examiners are reviewed and scrutinized by the customs collectors/officers to ascertain the correctness of the taxes/duties due.
REMITTANCE/DEPOSIT The Collection Division, Cash Division or Treasurer’s Office is likewise responsible for ensuring that all revenues collected by the collection agents/officers are remitted intact. These remittances/deposits are duly covered by validated deposit slips. However, remittances made by accredited agent banks to the National Treasury through Bangko Sentral ng Pilipinas are evidenced by duly approved Credit Advices. Remittances/deposits are also closely monitored. The Bureau of the Treasury under the Department of Finance accounts and regularly reports all remittances received. On the other hand, it is the duty of the Commission on Audit to determine whether all revenue collections are remitted in accordance with existing rules and regulations.
RECORDING Proper recording of revenues to the appropriate books of accounts is the primary responsibility of the Accounting Division. Submissions of the required collection reports together with all the supporting documents are closely monitored. These reports are processed before these are summarized and classified in the books of accounts. Collections and remittances/deposits are regularly reconciled to ascertain reliability of the account balances. The duty of the Commission on Audit is to ascertain that all transactions pertaining to revenues are properly recorded in the appropriate books of accounts.
In the Local Government Units, the Assessor’s Office is responsible for the assessment of real property taxes. This is being done before payment of the tax has been made. Assessments made by the assessment clerks are viewed by the Assessor to ascertain correctness of the taxes due. A change in the rates of taxes is made through the issuance of an ordinance but it should not exceed what is required by law.
COLLECTION The Collection Division, Cash Division or Treasurer’s Office is responsible for the efficient collection of revenues due to the government. Revenues are collected either by the agency’s collecting officers, accredited agent banks or by other authorized government agencies. Collections are acknowledged by official receipts or through machine – validation. The collection performance is closely monitored by the head of office or the chief executive. The revenue generating agencies including the local government units are responsible for the attainment of the revenue set by the m and approved by the Department of Finance. Collections are acknowledged by official receipts or through machine validation. The collection performance is closely monitored by the head of office or the chief executive. The Commission on Audit, on the other hand, determines whether revenues including fines and are collected when due, properly receipted, and accounted for. It likewise determines the reasonableness of the revenue targets, and the reported collection efficiency
On the other hand, the Commission on Audit determines whether revenues are correctly assessed in accordance with laws, rules and regulations. It should also ascertain that methods of assessment provide protection against error and irregularity