Posted on
March 18, 2013 11:52:22 PM [ BusinessWorld Online ]
By Bettina
Faye V. Roc, Reporter
SELF-EMPLOYED
individuals, small business owners and professionals (SEPs) who pay less than
P200,000 in income taxes annually will be prioritized for audit by the Bureau
of Internal Revenue as the government seeks to improve its finances.
"I signed a revenue memorandum circular,
basically stating that although all taxpayers will be audited, the priority
that will be audited are those business taxpayers whose average payment are
below P200,000," said Kim S. Jacinto-Henares, Bureau of Internal Revenue
(BIR) commissioner, in a briefing yesterday.
"We’ll
look at those who pay less than that and whose growth rate in their income tax
payment is below 35% and gross revenues reported did not go up by more than
40%," she added.
The circular,
once released, will be effective "immediately."
The BIR chief
said this was part of the government’s drive to widen the collection base and
increase the overall tax effort.
"Our
data shows that about 1.8 million are registered as SEPs but only 402,934 of
those filed returns, paying an average of P33,441 annually. We want to find
those missing 1.4 million registered as SEPs," Ms. Jacinto-Henares said.
She added
that 1.8 million was also a "conservative" number.
"PRC
(Professional Regulatory Commission) registrations show two million active
professionals, while in the DTI’s (Department of Trade and Industry) database,
there are 816,759 registered micro, small and medium enterprises," she
noted.
Apart from
accounting for all registered SEPs, average payments must also be increased,
Finance Secretary Cesar V. Purisima said.
"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,"
he said.
The Finance
chief said visits to the BIR’s revenue district offices revealed 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," he said.
"This
implies that these professionals earn even less than minimum wage earners.
These numbers are ridiculous."
He said the
BIR was also looking into benchmarking average tax payments by profession and
industry.
Ms.
Jacinto-Henares added that aside from ongoing initiatives to improve
operational efficiency, the BIR will also use existing information from various
organizations in order to effectively monitor taxpayers, such as looking into
business permits issued at the local level and looking into memberships in
professional organizations.
BIR data
showed that total individual tax collections amounted to P223 billion last
year, 14.95% higher than the P194 billion recorded in 2011. Of this, P181.7
billion or 81.5% came from taxes withheld on wages of compensation income
earners. In comparison, SEPs only accounted for P15.1 billion or 6.8%.
The ratio of
payments made by the sector to the bureau’s total tax take from individuals,
the BIR noted, declined from 8.4% in 2010 and 6.9% in 2011. Collections from
SEPs currently only account for 0.13% of the country’s gross domestic product
(GDP), Mr. Purisima also said.
"We want
to increase this to 2.1% of GDP or P360 billion by 2016," the Finance
chief said.
"This
will help us in achieving our total tax effort ratio goal of 16% of GDP by
2016."
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