BIR to intensify drive to collect more from 'self-employed' taxpayers

By VG Cabuag, BusinessMirror

Posted at Aug 14 2012 07:14 AM | Updated as of Aug 14 2012 10:15 PM

MANILA, Philippines - The Bureau of Internal Revenue (BIR) bared over the weekend plans to beef up the deployment of officers to monitor the business activities of self-employed taxpayers that would now include General Professional Partnerships (GPP).

Internal Revenue Commissioner Kim Henares said the move is part of the BIR’s response to Finance Secretary Cesar Purisima’s order to increase the annual average tax collections on self-employed individuals, which, he claimed, “pay so little to the government.”

GPPs are formed by individuals to mainly exercise their common profession. No part of the income is derived from engaging in any trade or business.

Tasked for the job were the agency’s revenue district officers, who look at the compliance level of the individual taxpayers, and to include so-called backyard businessmen. “We are asking our people in the field to monitor sole proprietor and professionals under their respective jurisdictions. And to take such enforcement procedures available to enforce the law,” Henares said.

Purisima has asked the BIR to raise the annual average tax collection on self-employed individuals to P200,000 before the Aquino administration ends its term in 2016.

To date, the average annual tax collection of individual taxpayers under such classification was placed at about P5,500.

“We already started with our policy cases. But this time, we will further step up our enforcement power by expanding our coverage to GPPs,” Claro Ortiz, BIR head revenue executive assistant and overall coordinator for the Run After Tax Evaders Program, said.

The substantial part of the strategy is to deploy more revenue officers that would pose as patients for doctors, clients for single proprietors and customers for other businesses, he said. Such strategy may entail additional logistical funding though.

“We have been doing this already. But this time, we will see to it that our enforcement power would be felt more clearly. We have to force them to issue official receipts,” Ortiz said.

Some of the cases filed before the Department of Justice that were built up by the BIR in the past used organic personnel who posed as customer in a salon or a client who went for a check- up in a clinic.

Ortiz, however, said the BIR would employ a different approach when it comes to law and accounting firms and other professionals forming themselves as GPPs.

“Now, since GPPs are not taxable unlike corporations, we can only ascertain their compliance once the partners have actually or constructively received their distributive shares [of the income of the GPP],” Ortiz said.

Partnerships are still required to file income tax return to furnish the BIR information on its share in the gains or profits which each partner shall include in his individual return.

Ortiz said that to ensure compliance in this class of taxpayers, the BIR would have tighten its auditing on the income tax returns (ITR) filed by GPPs versus the income tax returns filed by the members of said partnerships.

“This has to be looked at more tightly. We can no longer rely on the partner’s individual returns. Their ITRs should correspond to their [GPPs] audited financial statements and ITRs. Otherwise, there will be legal consequences,” Ortiz he said.

For the year, the bureau targets to raise P222.28 billion from professionals, 15 percent higher than last year’s P192.72 billion.

Individual income taxes account for over a fifth of the BIR’s collection, with the bulk coming from salaried individuals whose payments are automatically withheld by their employers.