Government auditing regulator not keen vs red tape?

The Board of Accountancy, the government’s auditing regulator, is being accused of impeding President Duterte’s efforts to curb red tape with its new requirements on financial reports submitted by taxpayers.

The accusation came from no less than Finance Undersecretary Antonette Tionko who decried the BOA’s insistence on requiring the submission of compilation reports, notwithstanding the decision by the Bureau of Internal Revenue (BIR) to do away with this requirement as part of the attachments to the Income Tax Returns (ITRs) filed by taxpayers. “The BOA’s insistence on requiring the submission of the compilation reports is additional red tape and could impede the BIR’s ability to collect taxes, especially now that the bureau is streamlining and simplifying processes in time for the submission of income tax returns and with many tax filers trying to beat this year’s deadline on April 15,” said Tionko, who heads the Finance department’s Revenue Operations Group.

Tionko noted that the compilation reports cannot be prepared by just any CPA but should be done by those accredited by the BOA, which requires them to undergo 120 hours of paid seminars per year.

Tionko said the DOF has already relayed its concerns regarding BOA’s refusal to co­operate with the anti-red tape campaign to the Profession­al Regulation Commission, which has supervision over the BOA.

Assistant Finance Secre­tary Mark Joven also revealed that the Philippine Chamber of Commerce and Industry (PCCI) has likewise com­plained before the SEC about the BOA’s requirement of submitting the compilation reports, as this was not only “unnecessary and redundant,” because businesses were al­ready required to submit a duly signed Statement of Manage­ment Responsibility together with the financial statement, but also adds to the cost of doing business, especially for SMEs.

Besides the PCCI, small accountancy practitioners and the Philippine Institute of Cer­tified Public Accountants (Pic­pa) have also sought a tempo­rary restraining order against the other requirements on CPAs imposed by the BOA, he said.

The BOA and accountan­cy groups recently implement­ed a number of major auditing standards and procedures ex­panding auditing requirements that now need to include PSA 700 (Revised) or Forming an Opinion and Reporting on Fi­nancial Statements; PSA 701 (Revised) or Communicating Key Audit Matters in the Inde­pendent Auditor’s Report; PSA 705 (Revised) or Modifications to the Opinion in the Indepen­dent Auditor’s Report; PSA 706 (Revised) or Emphasis of Matter Paragraphs and Other Matter Paragraphs in the In­dependent Auditor’s Report; PSA 720 (Revised) or The Au­ditor’s Responsibilities Relat­ing to Other Information and, PSA 570 (Revised) or Going Concern report.

Because of the submission of these compilation reports, which the BOA insists should be attached to the audited financial statements of businesses despite the new BIR directive, private companies are compelled to hire certified public accountants (CPAs) accredited by the BOA to issue compilation certificates, on top of the independent auditor’s certificate already required by the BIR and Securities and Exchange Commission (SEC). The issuer of the compilation report is also required to be separate from the independent auditor.

Tionko said submitting these ITR compilation reports have proven to be tedious and costly for small- and medi­um-sized enterprises (SMEs) and could hamper the BIR’s tax collection drive.

Last year, the BIR issued Revenue Memorandum Circular (RMC) 21-2016 informing all revenue officials and employees of this BOA resolution requiring the submission of the certified compilation reports, along with the audited financial statements in filing ITRs beginning Dec. 31, 2016.

This circular, however, has already been amended by the BIR with its issuance of RMC 16-2017 last Feb. 22, which states that only the existing documentary requirements in the filing of ITRs would now be required by the bureau “in line with the government’s thrust on improving ease of doing business and streamlining bureaucratic requirements.”

These “existing documen­tary requirements” pertain only to the submission of the audit­ed financial statements, and, in certain cases, an attached audit certificate along with the ITR, and does not include the com­pilation certificate, Tionko said.

Tionko noted that despite the BIR circular, the BOA, in a resolution, pointed out that this requirement is legally al­lowed under the Philippine Accountancy Act of 2004 and has even warned CPAs to com­ply with the BOA requirement to avoid facing sanctions.

The DOF and its attached agencies have been at the forefront of the Duterte administration’s anti-red tape campaign with Finance Secretary Carlos Dominguez III last year appointing the department’s senior undersecretary—Gil Beltran –as its anti-red tape czar.

Beltran’s anti-red tape team has succeeded in reduc­ing the number of documenta­ry requirements in processing applications filed before the BIR and the Philippine Depos­it Insurance Corp. and is now working to streamline the pro­cesses in securing import and export permits.

Dominguez has likewise instructed the BIR and Bu­reau of Customs to imple­ment improvements in tax administration to help make the tax system simpler, fairer and more efficient, especially for low- and -middle-income taxpayers.

Cutting red tape and improving the ease of doing business are priority concerns of the Duterte administration in order to attract private in­vestments, stimulate growth and create more jobs. LUIS LEONCIO