DOF, BIR wage war on tax evading professionals, business owners

They should pay the price of progress

In a briefing today, Finance Secretary Cesar Purisima and BIR Commissioner Kim Jacinto-Henares declared war on self-employed, small business owners, and professionals who cheat on their tax filings to pay lower taxes.

Tax payments across regions and professions “ridiculous”.

“Across regions and across professions, it’s a common sight to see extremely low tax payments. There were doctors in Pangasinan that paid only P800 for the year, lawyers in Mindoro who paid only P121, a radio and TV practitioner in Quezon City who paid only P400, and a businessman in Cagayan de Oro who paid only P1,000,”Purisima said.

“This implies that these professionals earn even less than minimum wage earners. These numbers are ridiculous,” Purisima said.

The Finance chief added that during a visit to a revenue region, the DOF discovered that the top ten lawyers in that region had annual income tax payments P20,000.“A newly hired public school teacher pays substantially more than that,” Purisima said.

There were even multiple cases in Bacolod where taxpayers had gross sales of over P200 million, yet paid taxes of only P440,000 or less.

According to BIR data, even with a P1 billion increase in tax payments from self-employed and professionals from 2010 to 2012, that sector constitutes only 6.8% of total individual income taxes which is way below the 81.5% share of those whose taxes are automatically deducted from their salaries.

Widen tax base from 400,000 to 1.8 million
BIR data show that currently, there are 402,934 self-employed, business and professionals (SEP) taxpayers who pay an average of Php33,441. DOF and BIR aims to expand the number of taxpayers to 1.8 million and improve the average payment to P200,000 which will result into a 2% increase in the country’s tax effort by 2016.

“It is imperative that we broaden the tax base. In our survey of a prominent business association, we discovered that 23% of their members had no TIN, and 50% did not file returns. There is still a lot of room for improvement,” Henares said.

BIR records list1.8 million registered self-employed and professionals. The Professional Regulatory Commission (PRC) registrations show2 million active professionals, while inthe Department of Trade and Industry’s (DTI) database, there are 816,759 registered micro, small and medium enterprises.

“The 1.8 million taxpayer target is conservative,” Henares added.

Increase average payments from P33,000 to P200,000

“In addition to expanding the base, we have to drastically increase average payments. The current average annual payment of P33,441 implies a monthly income of P23,647. This is unbelievable considering the lifestyles of most entrepreneurs and professionals. It is reasonable to expect the average to reach P200,000,” Purisima said.

Data across regions show that Masbate, considered one of the poorest provinces in the Philippines, posted a higher average payment than San Juan City, Davao City, South Cebu City, and Kalibo (which covers Boracay).

Tax blessing, not burden
“There’s no more excuse to not pay taxes. Under President Aquino, we have shown the blessings that come from taxes. Dahil sa daang matuwid, buwenas na ang buwis, hindi na buwisit (Taxes now redound to blessings, no longer just a burden),” Henares said.

Since the beginning of the Aquino Administration, the country’s fiscal performance has greatly improved. With tax and revenue efforts increasing and borrowing costs decreasing, DBM data shows that the budgets of key agencies have gained record increases: DepEd by 45%, DOH by 77%, DPWH by 25% and DSWD by 267%.

Taking his cue from President Aquino’s call for greater participation from the citizens, Purisima called on citizens to pay their taxes, “As the President said, ‘the people are our bosses’. Good bosses don’t just complain; they do their share of the work. We call on our ‘bosses’ to share in the responsibility of moving our country forward by paying the correct taxes. We will all benefit from improved tax compliance.”

To those who constantly pay the right taxes, especially salaried workers whose taxes are automatically deducted, Purisima had a different challenge, “Ang mga tax evader, pabigat sa taumbayan (Tax evaders are free loaders.) They use services that our paid for by those who diligently pay their taxes. We encourage those who religiously pay their taxes to get even with those who smooch on their hard-earned money by reporting to BIR those entities that refuse to issue receipts and pay the right taxes.”

“Do not be an accomplice to the crime of tax evasion. When you cheat on taxes, you cheat not only your government, but your fellow Filipinos. You ultimately cheat yourself,” the Finance Secretary said.

On the part of the BIR, Henares gave a stern warning, “We are comparing lists of professionals and self-employed, with the LGUs, DTI, and PRC. We are prioritizing the audit of those with ridiculously low income tax payments. Don’t wait for the BIR to catch you. Pay the correct taxes now so you can spare yourself from criminal charges, and contribute to our country’s progress.”
Secretary Purisima and Commissioner Henares have visited over the past two months, 11 of the 19 revenue regions of the Bureau of Internal Revenue, to discuss tax administration priorities, and to emphasize the use of information to drive performance.