Tax Audits to be prioritized for those paying less than P200K in taxes
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."
- See more at:
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CARLOS ANI - Consultant
Chairman of the Board - SEEDFINANCE Corporation
Mailing address: PO Box 90 UPLB Los Banos Laguna, Philippines 4031
Emails: carlosani@gmail.com , carlosani@seedfinance.net
Landline Phone: +63495010127 (PLDT)
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