By Lawrence Agcaoili

THE government lost P5.5 billion in potential revenue last year from compromise deals with taxpayers who had questioned their tax assessments.

In a report submitted to the Congressional Oversight Committee on the Comprehensive Tax Reform Program, the Bureau of Internal Revenue said it approved 27 compromise and abatement cases involving unpaid taxes amounting to P9.31 billion last year.

After a series of negotiations, the bureau approved the collection of only P3.79 billion, thereby foregoing P5.5 billion worth of potential revenue.

The law allows the bureau to enter into compromise deals if there is reasonable factual or legal doubt as to the validity of the claim against the taxpayer.

The bureau may also approve abatement based on unjust or excessive assessments under the tax code.

Last year, the bureau missed its original P845-billion collection goal by P67 billion after it collected P778.2 billion.

The Finance Department scaled down the bureau’s collection target to P810 billion due to the economic slowdown brought on by the global financial crisis, but the agency still missed its revised target by P31.42 billion.

For this year, the government has scaled down its tax collection target again, this time by P45.2 billion to P865.5 billion.

As early as 2006, the congressional body headed by former Senator Ralph Recto and Rep. Jesli Lapus expressed alarm over the decision of the bureau to forge compromise deals, saying it could unduly deprive the government of much-needed revenues.

The committee has recommended amending the tax code to clip the bureau’s power to enter into such agreements.

The congressional body started its review of compromise agreements after the bureau entered into a deal with the state-run Philippine Deposit Insurance Corp. in a case involving unpaid income and value-added tax amounting to P7.6 billion, including penalties and surcharges. This was cut down to only P1.5 billion through a compromise deal.