Pay your rightful share of taxes

When I was growing up in a working class section of Paco, my father had his annual Holy Week penitensya. Dressed in his sando and shorts, he would turn on the ceiling fan, sit down on a table in our small drug store. He would then start typing in his trusty portable Underwood typewriter the drug store’s annual inventory.

And there I was helping out by counting each bottle or carton of the drugs and other merchandise we were selling. Thinking about this painstaking ritual many years later, I wondered why he didn’t just guess the items in the inventory. It probably would have made very little difference.

But my Dad, a professor of medicine at UST, was of the old school. He was fastidious about paying the right taxes. He complained and cursed the BIR every year but he made sure the income tax return he filed is as accurate as he could make it. He could have taken the Holy Week off to take his only son, me, to the beach but he thought it was more fun to work on his income tax return instead.

My Dad was of the pre-WW2 generation that still had a healthy respect for government. I remember him talking about paying our rightful share in ensuring efficient government services. And he appreciated what he got back in return. He, my mother and all five of us children all got our college education at UP and with the exception of my mother and one sister, even high school.

I thought of my Dad and my Mom, both doctors, as I read the briefing paper of the Department of Finance that talked of doctors and other professionals like lawyers, dentists, accountants, etc cheating on their income taxes. This is a different generation, with different values.

According to the DOF/BIR, there are doctors in Pangasinan paying only P800 in taxes per year, and lawyers in Bacolod, P200. A radio and TV practitioner in Quezon City paid P400 a year, while a businessman in Cagayan de Oro, P1,000.

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

Indeed, it had been my pet peeve for years to learn that some relatives and friends who are doctors and lawyers and business people paying a lot less than I have been paying in income tax. Yet, the quality of their lifestyle is something I could only dream about.

That’s because I had been an employee for my entire working life and the salary I got was always net of taxes withheld by my employer. That meant for most of the recent years before I retired, I paid at the rate for the highest income bracket or close to it. I effectively worked for government for at least three months of the year.

Getting hold of BIR data today made me even madder than ever at the inequity. Guys like me whose taxes are automatically deducted from their salaries are paying 81.5-percent share of taxes collected. Those who are self-employed and professionals pay for only 6.8 percent. Others are capital gains and other taxes.

Talk of free loaders! Yet these are the people who drive fancy cars, live in high class subdivisions or condos and wear blinding jewelry. BIR Chief Kim Henares said that when they took a survey of a prominent business association, they discovered that 23 percent of their members had no TIN, and 50 percent did not file returns. I can imagine that this business association is one of the noisiest in demanding government spend more on services and infrastructure too.

According to Ms. Henares, BIR data show there are 402,934 taxpayers who are self-employed, entrepreneurs and professionals who pay an average of P33,441. “This tax 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,” Sec. Purisima said.

BIR records also list 1.8 million registered self-employed and professionals. There are two million professionals registered with the Professional Regulatory Commission (PRC), while in the Department of Trade and Industry’s (DTI) database, 816,759 micro, small and medium enterprises are registered.

It is obvious that too many of those who should know better and who probably even think of themselves as morally righteous are enjoying a free ride. Sec. Purisima and Commissioner Henares pointed out the need not just to expand the base but to drastically increase average payments.

I totally support this effort to expand the number of people paying taxes. An all out campaign to increase the number of people paying taxes and paying the right amount in taxes, should have happened a long time ago.

The goals of increasing the number of taxpayers to at least 1.8 million and improving the average payment to P200,000 are actually quite modest. That will result into a two percent increase in the country’s tax effort by 2016.

We cannot keep on having a situation where, as the DOF discovered, the top 10 lawyers in one region each paid only P20,000 in income tax. As Sec. Purisima exclaimed, “a newly hired public school teacher pays substantially more than that.”

The BIR has learned to make good use of its state-of-the-art computer system. They are now using algorithms, something like what Google does, to produce data at their fingertips to lead them to the right targets.

For example, they have learned, from data crunched across regions, that Masbate, one of the poorest provinces in the Philippines, has a higher average payment than San Juan City, Davao City, South Cebu City, and Kalibo (which covers Boracay). How can that happen? Or put another way, how could they have allowed such inequity to happen through the years?

Well, from what we have seen since P-Noy took over, the happy days of the tax evaders are nearly over. BIR Chief Henares is not only relentless, she is also clean. I haven’t heard any derogatory complaint about her, something that is amazing for someone in her position. I have heard complaints about how strict she is.

Ms. Henares has approached her tax collection mandate as she would run a business enterprise. She zeroes in on where she can get the most bang for the modest budget of her agency.

She is increasing the number of income tax filers by looking at the lists of those who buy expensive cars, those who are members of professional organizations and exclusive country clubs. She is sharing data with other government agencies like the Professional Regulatory Commission.

BIR Chief Henares said the bureau already issued a circular for the automatic audit of self-employed professionals and individuals who pay taxes that are below P200,000. That makes sense because P200,000 in income tax means that they’re just averaging around P50,000 monthly income which is not realistic for a real professional or self employed individual who live well.

There are many of us who justify tax evasion by saying the money is wasted by government anyway. I remember UP economist Philip Medalla once commented that “the problem with taxes is that people do not like the quality of spending.”

Then there is also former Budget Secretary Ben Diokno who advocates simplifying the tax law to increase compliance and fight corruption that emanates from too much discretion. I support this call for a simple way of paying taxes.

The BIR’s dark forest of rulings known only to them must be codified. It would be nice to have a system that does not require the services of a tax accountant to figure out BIR rules.

To those who constantly pay the right taxes, especially salaried workers whose taxes are automatically deducted, Sec. Purisima is encouraging them “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.”

Oo nga naman. Sobra na sila.

Jesuit joke

We have been getting an avalanche of Jesuit jokes with the election of Pope Francis. It probably goes to show it is more fun to be a Jesuit. Or it is more fun to have the Church run by a Jesuit Pope.

Here’s one more from Ramon G. Madrid.

A Franciscan, a Dominican and Jesuit were celebrating Mass together when the lights suddenly go out in the church.

The Franciscan praises the chance to live more simply.

The Dominican gives a learned homily on how God brings light to the world.

The Jesuit goes to the basement to fix the fuse.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco