Campaign against tax evaders

THE EUROPEAN Chamber of Commerce of the Philippines (ECCP) recently wrote the Department of Finance (DOF) about the shame campaign the government is engaging in to increase revenue collections.

Last year, the Bureau of Internal Revenue (BIR) published “Tax Watch” advertisements that gave the impression that low-salaried teachers and workers pay more taxes than highly paid professionals.

Using a similar approach, the Bureau of Customs (BOC) has come out with its “Customs Watch” bulletin that shows the names of import consignees, customs valuation of imported products and the corresponding tax payments.

The underlying message in the difference in figures is some importers are short-changing the government in the payment of customs duties.

Obviously, the advertisements are aimed at shaming or putting moral pressure on the parties concerned to comply with their tax obligations.

EECP general manager Henry Schumacher said “European businessmen were concerned about the potential negative impact of flagging responsible taxpayers and importers in the Tax and Customs Watch advertisements, thus damaging their reputation without having been given the chance to explain why the discrepancies exist.”

He asked the DOF to reassess the preparation of these bulletins to avoid misleading advertisements that could damage the reputation of the affected parties.

Obligation

The reaction of European businessmen to the shame campaign is understandable. This revenue collection scheme is not used in the countries they grew in or earned their business spurs.

The fact that the method is officially sanctioned by a government that supposedly adheres to the principles of fair play and due process makes it more difficult to accept, much less agree to.

In Europe, people generally comply with their tax obligations because they see and enjoy the fruits of their taxes in the form of, among others, quality infrastructure, excellent educational facilities and affordable health services.

Their taxes are properly spent and do not find their way to the pockets of corrupt lawmakers and public officials.

And if a taxpayer gets caught violating the tax laws, sanctions are swiftly and promptly imposed. The assets of tax evaders are confiscated and auctioned off to pay for unpaid taxes and, where applicable, prison terms are ordered served.

Their tax laws are no respecters of social or political status. Elected officials, no matter how highly placed, are obliged to pay the right taxes like anyone else; otherwise they would find themselves in serious trouble.

So who needs a shame campaign to compel taxpayers to contribute their share in meeting the financial obligations of the government if the judicial system is scrupulous in the enforcement of tax laws?

Environment

In the context of our cultural and social environment, hiya (or shame) is often more effective in bringing the desired results than threats of financial or penal sanctions.

The tax evaders in our midst have little to fear about being haled to court for tax evasion because it’s easy to game the judicial system.

They know that, with the right political connections or assistance of crafty lawyers, they can interminably delay the investigation of tax evasion cases and their filing in court.

In the unlikely event the BIR succeeds in proving its complaint, it will take five to 10 years before the case is resolved with finality.

By the time judgment is rendered, assuming it goes against the tax evader, the latter is either dead or nowhere to be found, or has closed shop and absconded with whatever asset that can be levied upon to satisfy his unpaid tax obligations.

Unconventional (if not irritating to the affected parties) as Tax Watch and Customs Watch may be, the BIR and BOC cannot be faulted for taking this approach in their effort to meet revenue targets.

Used in tandem with sending tax assessment notices and filing of criminal complaints, the BIR’s shame campaign has, by and large, proven to be effective in “convincing” taxpayers who have poor track records on tax compliance to be more conscious of their tax responsibilities.

Revenue collection

It will be recalled that last year, shortly after the BIR came out with advertisements about the glaring disparity in tax payments between teachers and doctors, the then president of the Philippine Medical Association, stung by the negative publicity, asked the BIR for assistance in advising his fellow physicians on the proper tax payment procedures.

Soon after, the number of doctors who issued receipts to their paying patients and the tax collection from the medical sector rose considerably.

The prospect of suffering a similar humiliating experience prompted many professional basketball players into requesting the BIR to brief them on the correct way to prepare their income tax returns and pay taxes.

Although there is no official record on whether the professionals in other fields went through a similar “catharsis,” it is apparent, based on anecdotal reports, that the BIR’s shame campaign has proven its worth.

The risk of losing face in the community in which tax evaders move around puts strong moral pressure on them to face up to their tax obligations.

It has been said that a Filipino will not hesitate to pawn his shirt and everything, or even go to extremes, if only to avoid hiya or humiliation in the eyes of his peers, especially the people whose esteem he desires.

From the European businessmen’s standpoint, the manner by which the BIR and BOC are conducting the shame campaign may be unacceptable. But in the Philippine context, it is a clever way of exploiting a cultural trait to accomplish the noble objective of improving the country’s coffers.

Sometimes, the ends justify the means.

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