Directing Timely and Complete Payment of Taxes as a Precondition for Entering into, and as a Continuing Obligation in Contracts with the Government, Its Departments, Agencies and Instrumentalities

MALACAÑANG
Manila

BY THE PRESIDENT OF THE PHILIPPINES

EXECUTIVE ORDER No. 398 January 12, 2005

DIRECTING TIMELY AND COMPLETE PAYMENT OF TAXES AS A PRECONDITION FOR ENTERING INTO, AND AS A CONTINUING OBLIGATION IN CONTRACTS WITH THE GOVERNMENT, ITS DEPARTMENTS, AGENCIES AND INSTRUMENTALITIES

WHEREAS, the Arroyo Administration is committed to good governance, the expeditious implementation of development projects, and the speedy delivery of basic services;

WHEREAS, there is a continuing need to develop a comprehensive set of economic proposals that will raise government revenue;

WHEREAS, an increase in government revenue by the timely and complete payment of taxes, which are the lifeblood of the government, will improve and upgrade efficiency in the delivery of basic goods and services to the public;

WHEREAS, private parties contracting with the State shall benefit by the assurance of a stable source of funds, in the form of taxes, which the Government needs to compensate said private contracting parties for the goods and services to be delivered;

WHEREAS, to ensure the timely delivery of public services, it is...

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Summary of Executive Order No. 398

Timely and Complete Payment of Taxes as a Precondition for Government Contracts

- All persons or entities desiring to enter into or participate in any government contract must submit:
      - Their latest income and business tax returns duly stamped and received by the Bureau of Internal Revenue (BIR), with tax payments validated. (Section 1)
      - A tax clearance from the BIR proving full and timely payment of taxes. (Section 1)

- Government agencies must determine that the private contracting party is free and clear of all tax liabilities before entering into a contract. (Section 2)
      - The private party's responsible officer(s) must certify under oath that they are free and clear of all tax liabilities. (Section 2)

- All government contracts must include stipulations:
      - Requiring the private party to pay taxes in full and on time. (Section 3)
      - Allowing the government to suspend payment if the private party fails to pay taxes. (Section 3)
      - Requiring the private party to regularly present a tax clearance and validated tax returns during the contract duration. (Section 3)

- Government agencies must regularly furnish the BIR with the names of private contracting parties and payment amounts to enable the BIR to scrutinize tax payments. (Section 4)

- The Department of Finance shall adopt necessary operating guidelines to implement this Executive Order. (Section 5)

- This Executive Order takes effect 15 days after publication in a newspaper of general circulation. (Section 7)