GENERAL SANTOS CITY, March 7, 2014 – The “name-and-shame” campaign of the Bureau of Internal Revenue to collect more taxes from underpaying taxpayers is a shame – more to the BIR than to the underpaying taxpayers. It is an admission of helplessness and a desperate tack to make its poor tax collection system work.
This weekly “name-and-shame” campaign to crack down on tax evaders by means of advertisements in the national papers has a P108-million funding awarded to the JWT Philippines advertising agency by Millennium Challenge Corp., a United States foreign aid agency, through its Metro Manila subsidiary the Millennium Challenge Account-Philippines. This is part of the Revenue Administration Reform Program with $434-million grant from the US government.( (Philippine Daily Inquirer, March 4, 2014: Doctors slam BIR ad: We’re not tax cheats;Charges of doctoring taxes unfair–PMA)
Three different half-page ads came out in March 2 Philippine Sunday Inquirer and Manila Daily Bulletin: one, showing an “online seller” astride on the shoulders of a construction “foreman”; another, an “independent accountant” on the shoulders of a “sous chef (assistant chef)”; and still another, a female “doctor” on the shoulders of a female “teacher”. While we only have the Inquirer and the Bulletin on hand, these must have appeared in other Manila papers on March 2.
With the pictures are the facsimiles of Income Tax Returns with names, incomes and taxes paid. There are no positive indicators that the persons in the pictures are those named in the ITRs. Yet, the purpose is clear: to tell all that the higher earners paid lesser taxes than the lower earners.
In the first, the “online seller” reported an income of P400,000, paying no tax; the foreman, an income of P253,680.10, paying P38,420.10 tax or 15 percent. In the second, the “independent accountant” reported an income of P540,000, paying P2,574.24 tax or 0.5 percent; the “sous chef”, an income of P513,571.17, paying P10,145.10 tax or two percent. In the third, the “doctor” reported an income of P1,075,080.52, paying P7,424 tax or 0.6 percent; the ”teacher”, an income of 852,169.48, paying P221,694.23 tax or 26 percent.
Of the six only the teacher and the foreman paid the correct taxes. The teacher paid the bigger percentage because the tax had been deducted from every pay check. This is true of all salaried officials and employees in public and private offices and establishments where taxes are withheld every pay day.
There seems to be no evidence how effective this tax drive has been. In the first place, not all read the national papers. Second, it generates group resentment as seen in the reactions of the Philippine Medical Association and of the two national organizations of teachers. Other groups – those of lawyers and accountants – may not be giving a damn to the BIR “shame” campaign.
Putting to shame the tax evaders or underpaying taxpayers is unnecessary. In reference to the doctors, BIR Commissioner Kim Henares said that the ad was based on actual data collected by the BIR showing significant discrepancy between taxes paid by doctors and their estimated incomes. If BIR has the “actual data”, understood as based on the ITRs, the individual erring taxpayer should be examined and penalized. That will be a lesson and next time he or she will pay the correct tax.
Why does the BIR not use the P108 million for the shame ads to hire examiners to examine the ITRs so that the erring taxpayers could be confronted immediately with their deficiencies and settled? At the same time, the different professional organizations could be furnished lists of their members who are not paying their taxes properly. Partnership with these organizations will help.
In the case of the doctors, the PMA and the BIR have had consultations regarding doctors who were not paying correct taxes. In full support of the BIR, the PMA had created a committee to help the BIR collect taxes from doctors, said PMA President Dr. Leo Olarte and spokesman Dr. Mike Aragon. The PMA is studying Henares’ suggestion that doctors use online tax filing system. (Same siurce as above: PDI-3-4-14: Doctors slam BIR ad…) Why has Henares disregarded this?
Olarte is appealing to Henares to intensify instead of hurting the existing partnership of the BIR and the PMA “by doing more joint activities on taxation”. In response, Henares said doctors should not take the print ad personally. Doctors who claim to be paying the right taxes should not feel hurt by accusations that many of their colleagues are tax delinquents. That’s easier said than felt. Will Henares not feel hurt if a report or an opinion article or an ad appears in a newspaper depicting the BIR as a nest of corruption?
Obviously, Henares does not see the inefficiency in the BIR tax collection system. Should a serious study be done, it would not be a surprise if it is found out that the BIR collects barely 50 percent of the collectibles. Tax evaders, cheaters and manipulators pocket the bigger chunk.
Only malls and some big business establishments are using BIR-sealed computerized electronics machines. Many stores still use the cash registers and cash invoice “on demand”; many sales are without cash invoices or receipts. In some eateries, bakeries, drugstores, etc. sales are just listed down. At the central market for instance, no invoices or receipts are issued for rice, fish, meat, etc. Some hardware stores or establishments – if not most — selling construction materials issue only order or delivery receipts for cash sales. Service shops, parlors, etc. don’t issue receipts.
What does BIR do? Post reminders to customers, clients, patients, etc. to “Ask for Receipts”. What happens? “No ask, no receipts!” Why not issue the reminders to the establishment owners, service shop operators, etc.? Then field agents to check on compliance to the requirement.
The Millennium Challenge Account-Philippines started operating in September 2010. That after almost four years, the BIR has still to resort to weekly “name-and-shame” campaign to collect the correct taxes from the professionals in private practice is an admission of inefficiency. If the uncollected taxes from the professionals account for a big loss of national revenue, the loss from unreported sales and service fees could be bigger.
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