The Philippine Online Chronicles

Two weeks ago, at the height of the Villarica tax evasion case, the Bureau of Internal Revenue (BIR) announced that sari-sari store owners, pedicab and tricycle drivers, and market vendors are now being required to issue sales invoices or receipts.

Apparently, the agency is in great pressure to deliver more-than-satisfactory collections to combat the ballooning budget deficit. And so it has turned its attention to the underground economy, which has just about 40 million Filipinos working in it. BIR Commissioner Kim Henares was even quoted saying, “Why should somebody pay tax and somebody else not pay?”

The public vehemently reacted to the idea and lawmakers also joined the foray.  A week later, BIR recanted what it just announced. Marginal income earners, which include the above-mentioned parties, are not required to issue receipts for sales of P25 and above. Marginal income earners are classified as those with an annual gross income of less than P100,000.

From the public’s point of view, it is inefficiency at its finest (or is it worst). Imagine going to the mom and pop store and after buying P25 worth of goods that may include a bottle of coke, biscuits and several sticks of cigarettes, you utter, “Manang, ung resibo po (Lady, where’s my receipt)?”

The commuting public doesn’t care about asking receipts from the tricyle and pedicab drivers either. Most of the time, the fare does not even go beyond P25. Even the “special” rate of the tricycles mostly cost just P20.00. What would they even declare in their income tax returns when they file them?

However, that is not the case with cabs. The Land Transportation and Franchising Regulatory Board (LTFRB) had already mandated taxi drivers to issue receipts since June 2009. At a flagdown rate of P30, they are already required to issue one for the passengers. However, the several times I rode the taxi (including the one I took for the interview for this position) I was never given a receipt, manually or otherwise. It is not a wonder why the agency complains of low compliance.  The agency could intensify its campaign against those. The collection is worth P2.2 billion, after all.

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I attended an open forum for life insurance agents hosted by the BIR. One thing I noticed when I got there was the confusing presentations of the speakers. One even commented, “Medyo magulo ho, 'no (It’s quite confusing isn’t it)?” on one of the articles he was discussing.

If he finds it confusing, so do we. Sometimes, I thought that the articles are deliberately written that way to let the public not understand them at all. It makes all the sense. If we don’t understand, then we are at their mercy on whatever they tell us.

I was glad, however, that I am compliant with all the tax requirements for my profession. After all, I diligently pay my taxes every month without a miss.

I can’t say the same for Mr. William Villarica. For those who were unaware of the (blatant) tax evasion case, he only paid P25,607.25 of taxes from 1998 to 2009. And in 2007, he bought a P26 million Lamborghini Gallardo. I paid more taxes in a year than he did for the past eleven years and I can’t even afford even a tenth of the price of that sports car!

How did he do just that? That is the mystery the BIR, Bureau of Customs (BOC), Department of Finance (DOF) and Department of Justice (DOJ) are separately investigating.

It’s the big fishes like Villarica that the government should focus its energies and resources on.

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One of the most beneficial laws the government passed was the Expanded Senior Citizen Act 2010 or Republic Act (RA) 9994. My parents have been excited about the savings they are getting. Now, instead of just the 20 percent discounts, merchants are required to deduct the 12 percent Value Added Tax (VAT) first and then deduct the 20 percent senior citizen discount. That is close to 32 percent of discount!

Compare the following computation before and after the Expanded Senior Citizen Act was passed.

Before the law:

Amount of goods                                             P1,300.00

Less 20 percent discount                                     260.00

Total amount due                                            P1,040.00

After the law:

Amount of goods                                             P1,300.00

Less E-VAT                                                          139.28

P1,160.72

Less 20 percent discount                                     232.14

Total amount due                                         P    928.58

That is a savings of P112, which can go a long way for some people.

Although the government stands to lose some P1.7 billion in tax revenues by foregoing the VAT in favor of the senior citizens, the additional savings can find their way back into the economy and can encourage more consumption.

Our legislators should also focus on these as well. That’s the reason we voted them into Congress.

Photo: “Tax by definition” by Alan Cleaver, c/o Flickr. Some Rights Reserved