Rich, self-employed evade P106B in taxes

The government has been losing P106 billion in individual income-tax revenues each year because of poor compliance by wealthy self-employed people, particularly own-account professionals as well as those running single-proprietor business establishments, Rep. Herminio Teves of Negros Oriental said.

"We have studies indicating that the government has been collecting only 47 centavos out of every peso in income taxes owed by self-employed individuals," said Teves, senior vice chair of the House Committee on Ways and Means.

Teves urged the Bureau of Internal Revenue to crack down on affluent self-employed individuals, saying rigorous tax enforcement is crucially important in building up compliance.

"Stronger enforcement is absolutely imperative. Compliance by the self-employed will significantly improve once the government raises the risk of their getting caught if they do not report taxable income," Teves stressed.

The BIR collected P96.7-billion worth of personal income taxes from a total of 485,748 individuals in 2004. Teves said 291,601 self-employed individuals paid only P12.41 billion in income taxes, or a measly 12.9 percent of the P96.7 billion.

He said 194,147 compensation earners or salaried employees assumed the bulk of individual income taxes -- P84.29 billion, or 87.1 percent.

"Nearly 100 percent of the individual income-tax leakage may be attributed to the self-employed. There is no problem with salaried workers, because a large portion of their taxes is already withheld at source by the employer," he pointed out.

The Philippine Institute of Development Studies estimates the annual personal income-tax leakage at P105.74 billion. This implies that the government has been collecting only 47 percent of the full potential taxes owed by the self-employed, Teves said.

The Department of Finance estimates the annual uncollected personal income taxes at P98.95 billion. To check rampant tax avoidance by the self-employed, Teves said the BIR should work closely with local governments. He said the BIR should be data mining with local treasurers and assessors. Teves said the BIR could track down evasive self-employed individuals by scrutinizing their locally reported sales and incomes, as well as the assessed values of their properties.

"For instance, a self-employed individual who has never paid income taxes might have a record with the city assessor’s office showing that he recently acquired real property worth millions of pesos. The BIR can then run after that individual for not reporting taxable income," Teves said.

"The assessor’s office is a gold mine of data on indicative personal wealth. This is because no individual can get a title to a real property without going through the assessor’s office and paying local taxes," he added. PNA

 

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