The paper is an update of the earlier NTRC study entitled, Profile of Large Taxpayers in the Philippines: 2003. Among others, it presents the profile of large taxpayers in the country and reviews the 2003 revenue performance of the BIRs Large Taxpayers Service (LTS).
Since its creation in 1993 by virtue of RA 7646, the LTS has served as a one-stop shop for large taxpayers in the country and has been responsible for monitoring and analyzing tax payments of more than 1,000 large taxpayers, representing over 50% of the BIRs total collection. In 2003, there were 1,204 large taxpayers of which 353 (29.3%) were from the manufacturing sector; 243 (20.2%), from the financial intermediation sector; 205 (17.0%), from the wholesale and retail trade and repair of motor vehicles and personal and household goods; 161 (13.4%), from the real estate, renting and other business activities; and the remaining 242 (20.1%) from the rest of the sectors.
Total LTS collection in 2003 amounted to P 232.6 billion or 54.6% of total BIR collection, representing a 7% increase over the 2002 collection. Collection from income tax provided the largest share of P 109.1 billion or 46.9% of the LTS collection; followed by excise tax, P 56.7 billion or 24.4%; VAT, P 47.9 billion or 20.6%; percentage taxes, P 10.9 billion or 4.7%; and other taxes, P 8.0 billion or 3.4%. However, LTS collection fell short of its target of P 237.9 billion by P 5.3 billion or 2.2%. While the LTS has become the top revenue earner for the BIR, the paper states that much can still be done to further improve its efficiency such as continuing and strictly monitoring existing revenue enhancing measures such as the Bayan I-text ang Resibo promo, Reconciliation of Listings for Enforcement (RELIEF) Program and year-round tax campaign.
The paper notes an alarming situation where out of the 1,204 large taxpayers, 506 or 42.0% incurred net losses or registered breakeven points; hence, contributing nothing to the government coffers in terms of the corporate income tax. In this regard, it suggests monitoring closely and continuously and strictly scrutinizing these firms to validate their claims for losses. Moreover, it points out that the ratio of allowable deductions to gross income is an area which requires benchmarking considering that the manufacturing, trade, financial intermediation and real estate sectors that comprised 80 % of the large taxpayers claimed about 70% or 90% of reported gross income as deductions. Benchmarking will ensure consistency in the reported income and claims for deduction by large taxpayers within the same business category.
