Gov’t sets tax drive vs self-employed

The tax policy reform program that the Department of Finance (DOF) will pitch to Congress this month will address the prevailing unfair system where wage earners carry the burden of income tax while the self-employed account for only a small portion of the tax take.

The government nonetheless plans to give delinquent taxpayers a chance to settle past obligations though a legislated tax amnesty.

“Revenue collections from professionals and self-employed individuals account for only 20 percent of the total personal income taxes collected by the government despite the high tax rates, while wage earners continue to carry the bulk of the burden, or 80 percent of revenues produced from income tax,” DOF spokesperson Paola Alvarez said in a statement.

“We have high tax rates for self-employed and professionals, yet we have a very narrow base among them. The Bureau of Internal Revenue (BIR), however, cannot fully audit them because of existing bank secrecy laws,” Alvarez said.

A recent report of state-run tax think tank National Tax Research Center (NTRC) titled “Income Tax Profile of Self-Employed Individuals and Professionals” noted that despite self-employed individuals and professionals being placed under “stricter scrutiny” by the BIR of late—mainly through a name-and-shame campaign targeted at professions with low tax compliance—this group of taxpayers continued to account for a smaller share to the total individual income tax collection.

During the last decade, self-employed individuals and professionals accounted for only 14 percent of collections, including withholding tax at source, whereas the bigger share of 86 percent was comprised of compensation income earners’ payments, the NTRC report showed.

In this regard, Alvarez said the Duterte administration would also lobby Congress to relax bank secrecy laws as a way to flush out tax dodgers.

“Malacañang’s economic team will push for the relaxation of bank secrecy laws for tax fraud cases and the inclusion of tax evasion as a predicate crime to money laundering. In relaxing bank secrecy laws, we want to cover all types of accounts, whether they pertain to deposits or investments, or to peso and dollar accounts,” according to Alvarez.

“We also want to include the crime of tax evasion as a predicate crime to money laundering so we can catch the big tax evaders and [bring] them to court,” Alvarez added.

The DOF was nonetheless “considering proposing legislation for a final tax amnesty that will be absolute to clear tax dockets,” she said.