How Tax Authorities of Southeast Asian Countries Deal with COVID-19
Author Atty. Mary Elizabeth M. Belmonte
Atty. Harlem P. Ma-at
On 19 May 2020, MVGS attended the seminar conducted by Deloitte Touche Tohmatsu Limited entitled “The State of Tax Administration in Southeast Asia: the Regulators’ Perspective.” The panel of speakers are public officials from Indonesia, Malaysia, Singapore, and the Philippines. They discussed the tax administration processes for each country in light of the COVID-19 pandemic. Specifically, the panel shared how their respective governments are helping taxpayers deal with the current environment in terms of tax compliance and tax controversies. Each speaker also highlighted how their respective tax agencies are adopting and utilizing technology in their tax compliance processes during this new and evolving landscape brought by the pandemic.
Tax Compliance during the COVID-19 pandemic
Several tax authorities of Southeast Asian countries provided taxpayers some tax compliance reliefs and incentives. In Indonesia, the Directorate General of Taxes (Indonesian: Direktorat Jenderal Pajak; also known as DJP) reduced the income tax rate and simplified the filing of income tax returns for corporate taxpayers. On the other hand, DJP extended the deadlines for the filing of income tax return for individual taxpayers. In Malaysia, the Government issued the PRIHATIN Stimulus Package which granted taxpayers several benefits such as a two-month extension to file their tax returns, waiver of penalty on deferment of tax payment, tax deduction for COVID-19 related donations, and priority of tax refund and clearance application. In the Philippines, pursuant to the Bayanihan to Heal As One Act (Bayanihan Act), the Bureau of Internal Revenue (BIR) extended the deadlines for filing of the tax returns and granted tax-exemptions to donations made in relation to COVID-19. In Singapore, similar extensions and deferment of payments were also made by the Inland Revenue Authority of Singapore (IRAS) in addition the waiver of tax penalties for those affected by COVID-19. Notably, the IRAS also granted interest-free installment tax payment plan to certain corporate taxpayers.
Dealing with Tax Audits and Controversies
Special rules or procedures were also adopted by the tax authorities in dealing with tax audit and proceedings during the pandemic. In Indonesia, new tax audits were suspended while the on-going audits are being done thru a work from home mechanism. Thus, Indonesian tax officials do not need to conduct site visit or be physically in-contact with taxpayers. In Malaysia, the Inland Revenue Board adopted similar policies by except for tax audits involving severe non-compliance, tax evasions, and aggressive tax planning. In the Philippines, the BIR suspended the statute of limitations and extended the deadline for submission of protest letters, position papers, appeals, and similar letters and correspondences. Like the Philippines, Singapore also exercised more flexibility and leniency in considering requests to extend the deadline to file objections to assessments, respond to audit queries, or step-down on supporting documents required for on-going audits. The IRAS, in granting the requests, considers the past compliance behavior of the taxpayer, the complexity of the case, and whether industry where the taxpayer belongs is affected by the pandemic.
Adopting in the evolving landscape of Information Technology
The spread of COVID-19 compelled tax authorities across Southeast Asia to adopt or utilize the increasingly complex nature of information technology. In Indonesia, in line with its work from home mechanism for ongoing audits, documents are now submitted digitally and discussions are held through encrypted virtual meetings. In Malaysia, digital offices and work from home set-up are also implemented. The Inland Revenue Board even expanded their “desk audit and profiling” by using their online database and utilizing third-party information from its data sharing system comprising of public and private companies. Meanwhile, in the Philippines, the digital transformation project of the BIR is still on-going. In addition, the BIR conducts tax audits using an audit software that matches third party information. In Singapore, the IRAS proactively promotes digital service channels for communication instead of face-to-face meetings. It also implemented secured communication channels for its taxpayers such as online chat, myTaxPortal, and AskJamie, a virtual assistant. Taxpayers were also encouraged to work with tax agents by submitting correspondences via encrypted emails or authenticated platforms.
Undeniably, the world is changed by the COVID-19 pandemic. It is imperative that taxpayers and tax authorities must be resilient and innovative in dealing with the “new normal” to enable the economy to grow or even flourish. The current climate may require governments to pass on legislations such as stimulus packages or additional tax reliefs and incentives to taxpayers. On the part of the taxpayers and tax officials, it can be as simple as the observance of social distancing. Measures such as online filing of tax returns and payment of taxes, reduction of face-to-face meeting, less site visits, adoption of computer-aided audit tools, and high utilization of the digital mechanism will undoubtedly go a long way in fighting this novel corona virus.