There’s no point having high tax rates when enforcement is the real
problem. That’s why the comprehensive tax reform program of the Duterte
administration is a necessary evil to make our tax system simpler,
fairer and more efficient.
There’s no reform without pain. We cannot change without having to sacrifice our old ways and maybe even our personal budget.
TRAIN package 1 has taught us that.
Based on the 2016 Annual Report of the Bureau of Internal Revenue
(BIR), most of the country’s income tax collections from individuals are
shouldered by employees whose income taxes are withheld at source.
Their contribution amounts to more than P280 billion of the P340 billion
in tax revenues from this sector
On the other hand, the collection from self-employed and
professionals (SEPs), despite the increase in taxpayer base by 12.31
percent and 6.86 percent, respectively, decreased by 1.18 percent from
P16.012 million in 2015 to P15.82 million in 2016.
Policy reforms must be supported by administrative reforms, and the
taxpaying public must be properly informed, guided and assisted to
encourage voluntary compliance. Tax rates can easily be increased or
decreased through legislation, same as adding new taxes. However,
broadening the taxpayer base and increasing voluntary compliance require
strategy, budget and collaboration. These are critical to making our
tax system efficient.
If the BIR were to improve its enforcement, then it needs an
increased budget to hire more technocrats and legal experts, and to
invest in technology to catch up with e-commerce and prosecute big- time
tax evaders.
As much as we need to intensify the audit of taxpayers, we also need
to investigate and remove corrupt BIR examiners who continue to leverage
on the ignorance of taxpayers and inefficiency of our tax system. How
come the same companies are still being audited for three or more
consecutive years despite their improving tax compliance? What’s the
real reason and why burden the few taxpayers (being audited) with the
increasing collection goal of the BIR?
BIR audit imposes 25 percent surcharge, interest and compromise
penalty on top of the basic tax due. Businesses end up having to pay
more than if they had simply complied. So, does the BIR audit improve
compliance of taxpayers being audited?
Not all those who have to pay these fines and penalties for noncompliance did so intentionally.
Business owners don’t need to have malicious intent to forget filing a
return, miss a deadline, or report an incorrect taxable income. They
might have just thought they had paid the right dues.
With all the provisions, revenue regulations, memorandum circulars,
and other legislation, it is often difficult to keep track of which
taxes to pay, how to pay them, and when to pay them.
If you have an educational background dealing with taxes, good for
you. Otherwise, you’d have to either start learning, or pay others to
understand the laws for you.
These businesses, once found noncompliant, are subjected to heavy
fines, penalties, and compromises. Their lack of intent does not excuse
them, of course. After all, ignorance of the law excuses no one. Even
so, something needs to be done to address this issue.
The general tax amnesty currently being reviewed in Congress can help with that problem.
TRAIN’s package 1B will provide not only businesses, but every taxpayer, a fresh start.
It is expected to generate about P40 billion for the government for
the year, which only goes to show the expansiveness of the reform.
However, that again poses the problem that the corrupt taxpayers can just start over with their misdeeds.
So, is the tax amnesty a losing proposition? It does not have to be.
That’s why requisite to an effective amnesty program is the lifting of
the Bank Secrecy Law to force erring taxpayers or violators to do
self-assessment and tax planning before filing for tax amnesty.
The amnesty addresses an end result, not a root cause.
Of course, that is not to say it is not a good solution—because it
is—just that it should not be seen as the answer to the country’s tax
woes.
What the country needs is a system that encourages honesty and integrity for both taxpayers and tax collectors.
With coming tax reforms intended to lower taxes, the government
exhibits its trust in the Filipino people. In turn, as citizens, we need
to do our part.
Voluntary compliance will be the key to a better system.
At the Asian Consulting Group (ACG), we are committed to helping taxpayers pay the right taxes.
But paying the right taxes does not have to mean paying more taxes.
Unnecessary penalties, interest and compromises are the main cause of
a taxpayer’s headache, and if taxpayers choose to be more compliant
(and honest), then they can get rid of all these problems.
This is where knowledge and professional help can play a significant part.
Just because a taxpayer wishes to comply with taxes voluntarily does
not mean they would be free from the burdens of taxes immediately.
With the right assistance, taxpayers can save millions of pesos while
helping the government collect the right taxes without unnecessary
penalties and compromises.
Taxpayers who are frequently audited will now have options, either
they wait and prepare for the implementation of general tax amnesty or
apply their companies to the Seal of Honesty (SOH) Certification
Program.
Visit www.sealofhonesty.ph for more information.
If you’re interested, you may want to know about Citizen Tax Planning (CTP) to stop a BIR audit.
CTP is a game-changing strategy to help taxpayers pay the right taxes without the unnecessary penalties and compromises.
E-mail us at consult@acg.ph, for more details. You may also visit www.acg.ph.
source: Inquirer
As we always say, if we want a better Philippines, we need to be good citizens and better taxpayers.
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