The paper discusses the profile of large taxpayers and reviews its performance in the last five (5) years in terms of its contribution to government revenue.
Since its creation in 1993, the Large Taxpayers Services (LTS) has steadily contributed the lion’s share of the total collection of the BIR. The LTS serves as a "one-stop-shop” for the so-called "large taxpayers” which consist of the country’s largest corporate clients which are mostly multinationals and publicly-listed companies. Thus, much burden has been placed on LTS in terms of providing premium assistance to identified large taxpayers and at the same time closely monitoring their respective tax payments.
From 2006-2010, the total number of large taxpayers averaged 1,375. Of the total number, about 47% reported and paid to the LTS Regular Unit; 22% to the Excise Taxpayer Service (ETS); 16% to the Large Taxpayers District Office (LTDO-Makati); and 15% to LTDO-Cebu. It is noted that among the collecting offices, only the ETS registered continuous increases in the number of large taxpayers during the period under review.
By industry, the bulk of large taxpayers came from the manufacturing sector (28%); followed by wholesale and retail trade and financial intermediation industries with about 18% share each of the total number of large taxpayers. Real estate and renting, and transport and communication contributed 13% and 6%, respectively to the total. Ten other industries made up 15% of the pie; while inactive taxpayers constituted 3% of the total.
The total tax collection of the LTS continuously increased from 2006 to 2010, except in 2008 when it declined due to the decrease in the number of taxpayers in compliance with Revenue Memorandum Order (RMO) No. 25-2008 (Prescribing the Guidelines, Policies and Procedures in the Transfer of the Integrated Tax System Data and Records of Delisted and Newly Enlisted Large Taxpayers as Approved by the Commissioner of the Internal Revenue signed on May 26, 2008). On a yearly basis, the ratio of the LTS collection to total BIR collection increased from as low as 52% in 2006 to as high as 60% in 2007, but thereafter exhibited a fluctuating trend. Against its targets, LTS collection displayed a continuous shortfall in five years, ranging from 3% to 8% of the targets.
By collecting office, more than half (54%) of the LTS collection came from the LTS Regular Unit; followed by the ETS (37%); and the remaining 8% from the LTDO-Makati and LTDO-Cebu. By type of tax, income tax collection accounted for about 54% of the total LTS collection; followed by VAT, 20%; excise tax, 14%; and percentage taxes and other taxes, about 6% each.
In relation to total BIR collection by type of tax, income tax collection of the large taxpayers represented 50% of the total income tax collection of the BIR while excise tax collection almost completely covered the total BIR collection from the said tax. This is so because excise taxpayers such as cigarettes, alcohol, petroleum and motor vehicle manufacturers are mostly classified as large taxpayers. On the other hand, VAT collection of large taxpayers constituted about 55% of the total VAT collection while percentage tax collection represented over 60% of the total percentage tax collection.
The BIR’s efforts to boost revenues largely depend on the performance of the LTS. As experienced, by monitoring payments of only about 1,500 large taxpayers, the LTS was already able to collect over half of the total BIR collection in 2006-2010. In 2011, when the number of large taxpayers increased to over 1,900, the LTS contributed over 60% of the total BIR collection. Thus, by expanding further the coverage of the large taxpayers to capture about 85% or more of the total BIR collection, it shall be able to quickly raise and secure more revenue. Alongside this expansion of the coverage, however, are the required LTS strengthening in systems, processes and procedures, and other reforms including the provision of attractive pay incentive packages to be able to retain high-caliber examiners, lawyers and audit personnel.
