Taxing The Self-Employed Pinoys

The other day, I watched the live telecast of the 2011 State of the Nation Address (SONA) of our President Benigno S. Aquino III and among the many statistical figures he mentioned, it was the amount of taxes collected from self-employed persons and professionals that took my attention the most. In his second SONA, Pres. Noynoy Aquino or PNoy as he is more popularly known, reported that in 2010, there were about 1.7 million self-employed and professional Filipinos who paid a total of PhP9.8B in taxes for an average of only PhP5,783 per taxpayer.

The meager average amount of tax paid by the so-called Filipino businessmen (self-employed Pinoys) and professionals (lawyers, doctors, etc.) translates to monthly taxable net income of PhP8,500 which is lower than the current monthly minimum wage of workers in the National Capital Region. Our President mentioned these figures in the context of cheating (idiomatically called wang-wang in the SONA) the government by the private sector. The government’s take on taxes from these sectors is a pittance and I wish the report separated the amount paid by the professionals from those paid by the self-employed so that we could determine who is cheating more.

While I do not doubt the fact that many self-employed Pinoys (including professionals on private practice) are resorting to wang-wang on their tax payments, I cannot totally put the blame on them. Except for employees whose taxes on their incomes are computed, collected and remitted to Bureau of Internal Revenue (BIR) by their employers, all other taxpayers especially the small businesses, self-employed individuals and professionals in private practice have to undergo tedious procedures when paying their tax dues to the government. Not only that, their incomes are likewise taxed not only once nor twice but thrice. They have to pay taxes based on their incomes to their barangays, towns and cities and the BIR (Philippine national tax agency).

Self-employed individuals own, operate and/or manage their businesses or sources of income. Most of the time, they are one-man armies who have to do everything in order to earn money so can you imagine how they can find time to prepare documents and pay the monthly, quarterly and annual taxes to the various agencies I mentioned above? Either they have to ask some friends and relatives to tend their shops or close them during the days when they have to go out and pay to BIR the expanded withholding tax for their space rent on the 10th of each month and the percentage tax on the 20th. Add the quarterly preparation of income tax returns plus the payment of taxes due thereon and you can conclude how difficult it is to own a small business in the Philippines.

Lest I be charged of defending the wrongdoings in avoiding or not paying the right amount of taxes by the self-employed Pinoys, I wish to categorically state that I am not in any way in favor of any form of cheating by taxpayers. What I am trying to come across here is for the government to simplify our taxation procedures and make it easier for self-employed individuals to comply with the laws and pay the right amount of taxes. How about allowing the i-café owners to avail of the BIR’s Electronic Filing and Payment System (EFPS)? More on this later.