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MANILA – Self-employed individuals have been taxed lightly at the expense of salaried workers, who have borne the brunt of government exactions, according to the National Tax Research Center.
In its latest study, the state-run NTRC said the salaried workers paid P158.88 billion in taxes last year, six times more than the P25.92 billion paid by professionals and self-employed individuals, who include doctors, lawyers, accountants, and professional athletes.
The NTRC said the effectiveness of the Bureau of Internal Revenue’s withholding tax system on salaries of individuals - which makes them captive taxpayers - is the main cause for the high collection on compensation income earners.
In contrast, the non-filing of income tax returns is the culprit behind the low revenue collection from professionals and self-employed individuals. This can be seen in the mismatch between the number of registered professionals and business enterprises on the one hand, and the number of income tax filers on the other.
"It is noted that out of 1.7 million businessmen and professionals registered with the BIR as taxpayers, only about 489,000 filed their annual ITRs (BIR Form 1701) in 2010. So, how about running after the non-filers?" the NTRC said.
Compounding the problem of the low tax take from self-employed and professionals is the deliberate non-issuance of receipts "or the issuance of unregistered receipts from Recto" as NTRC put it. Businessmen and professionals issue receipts only when customers demand it.
"But thanks to 'Oplan Kandado' and 'Premyo sa Resibo' programs of the BIR as these have instilled a fear factor to many sellers who are not issuing receipts. On our part, let us help BIR by making it a habit to ask for official receipts. Otherwise, they can always under-declare their gross sales/receipts for tax purposes," the research agency said.
Another way of escaping the correct payment of taxes is the "propensity" of businessmen and professionals to deduct bloated expenses to reduce their tax liabilities. NTRC said these malpractices caused massive under-collection from this group of taxpayers.
According to its estimates, the amount of taxes that remain uncollected from the self-employed and professionals stood at P31.9 billion in 2008, P26.5 billion in 2009 and P24.1 billion in 2010.
"The good news though is that the tax gap has been declining from 64.4 percent in 2008 to 58.6 percent in 2009 and further to 49.6 percent in 2010 of the potential income tax," NTRC said.
This gap is also reflected when the data on taxable base is reported in the national accounts on compensation income and entrepreneurial income and are matched against the corresponding actual tax payments.
This means that income earners effectively pay about five to six percent of their total salary while entrepreneurs effectively pay only one percent.
"Anyhow, this so-called ‘hard-to-tax group’ of taxpayers will be this year’s focus of the BIR. In fact, the bureau has started filing tax evasion charges against high-profile professionals and businessmen," NTRC said.
"Hopefully the group’s tax payment will increase significantly this year. The Secretary of Finance wanted at least P100,000 tax each from this group of taxpayers," the agency added.
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