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The taxman is closely watching the self-employed and professionals who are paying taxes at “ridiculously low” amounts as well as those who do not pay at all nor even register with the Bureau of Internal Revenue.
Internal Revenue Commissioner Kim S. Henares on Monday said she has signed an order that put professionals who pay less than P200,000 in taxes a year on top of the list of candidates for an audit.
In a briefing, Henares also said the BIR was considering to file charges against lawyers, doctors, dentists and others practicing a profession who pay less than P30,000 in taxes a year.
She said the BIR was embarking on a renewed campaign against professionals and would assert itself as a law enforcement agency and shed its image as a mere customer relations outfit.
Henares explained that underlying this so-called war against professional tax cheats was the aim of widening the tax base—specifically raising the number of those who actually pay taxes.
BIR documents showed that there were 1.8 million professionals registered with the agency, but only about 403,000 of them pay taxes. For those who do pay taxes, they turn in an average of only P33,000 a year, an amount which Finance Secretary Cesar V. Purisima described as “a joke” and “ridiculous.”
Purisima said the government wanted to bring the average inflow from professionals to P200,000 a year.
“Increasing the average to P200,000 per (self-employed) filer is reasonable,” he said, citing an estimate of yearly expenses for a family of four with two children in school. He said this family spent some P870,000 yearly on recurring expenses, which cover food, utilities, fuel for a vehicle, and tuition and pocket money for the children.
This “conservative” estimate also factored in that the family of a professional owned a sports utility vehicle worth about P1.8 million and a house worth P8.5 million.
With such purchases and properties, the family owed the government about P211,000 in tax.
However, Purisima said that during a recent tour of the BIR’s regional offices, he found out that some lawyers—for example—paid less than P1,000 for a year’s tax.
“Some lawyers in Bacolod paid P200 an entire year,” he said. “Some doctors and dentists in Mindoro paid just P429.”
Further, Henares said shirking tax obligations was also prevalent among self-employed business owners.
“In our survey of a prominent business association with some 200 members, we discovered that 23 percent of them had no TIN (tax identification number) and half did not file returns,” she said.
This also showed, Henares added, that the target of making all of 1.8 million self-employed and professionals registered with the BIR was conservative.
Citing data from other government agencies, she said the Social Security System and the Professional Regulation Commission (PRC) both counted two million self-employed and professionals while the Department of Trade and Industry (DTI) listed 2.1 million. The National Statistics Office, through its Family Income and Expenditure Survey conducted every three years, counted 2.9 million.
“We are comparing lists with the local governments, DTI and PRC and we are prioritizing the audit of those with ridiculously low income tax payments,” Henares said.
“Pay the correct taxes now so you can spare yourself from criminal charges and contribute to our country’s progress,” she added.
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