In all assessments by the Bureau of Internal Revenue (BIR), the total amount of taxes a taxpayer has to pay grows exponentially as the tax investigation continues to be unsettled. These deficiencies usually involve large amounts which anybody, even those who are not privy to the tax investigation, speculate on the validity of the large deficiencies involved in an investigation. Needless to mention, many people wonder how the BIR came up with a billion-peso worth assessment against our Pinoy pride, Manny “Pacman” Pacquiao. The unimaginable amount of deficiency taxes involved in some BIR investigations could be attributed to the increment of the unpaid basic tax the taxpayer is being assessed of. This increment is commonly known as the penalty interest. Generally, an interest at the rate of 20 percent per annum (assuming there is no element of fraud) is imposed on the unpaid taxes. But the imposition of this interest retroacts from the time the taxpayer was supposed to pay the tax until the actual payment thereof. But assessments usually come out two years after the taxpayer filed its return. This is because the BIR has three years within which to assess any deficiency taxes (again assuming there is no element of fraud). Thus, if an assessment is issued two years after the taxpayer filed its return, an automatic 40 percent (20 percent x 2) interest will be imposed on the basic deficiency tax. This is one reason why deficiency taxes involve a considerable amount. The interest imposed in this Read More …
