Close  
Trailblazer

MSMEs’ tax compliance

/ 05:02 AM March 25, 2019

It is no secret that the majority of businesses in the Philippines are micro, small- and medium-sized enterprises.  Naturally, they will attract the taxman.

ADVERTISEMENT

We asked Mark Fajiculay, a management consultant and auditor, for some of his insights on two concerns: what benefits could MSMEs expect from proper compliance, and how to ensure that business is compliant.

Complying properly is beneficial to MSMEs in many ways:

FEATURED STORIES

Reduced exposure to BIR audit.  Many small businesses operate without proper maintenance of books, proper determination of taxes and use reductions beyond the parameters of law. This is a red flag to BIR examiners to scrutinize your records only to find out you do not have records nor basis for your declarations. A robust tax compliance system is essential to ensure that everything has a clear basis.

Avoidance of penalties (or S-I-C-kly costs). Businesses tend to regard taxes as burdensome. But it is more expensive to settle tax assessments with (SIC)kly penalties: S-I-C-k-l-y because it comprises surcharges, interest and compromise. It is simple arithmetic to compute that violations will result in the cumulative effect of 1+1=3. The three components are your (1) supposed tax due, (2) penalties and (3) economic agony or opportunity costs.  If you find tax compliance expensive, imagine all the penalties of noncompliance.

Contribution to the economy Lastly, being compliant will help the economy grow and provide society with opportunities.  If MSMEs envision long-term sustainability, then they should accept their tax obligation.

Here are tips on how to ensure your business’ compliance.

Know the rules of the game. We all agree that no one should arrive at a battle unprepared. Business owners often find themselves in a position where their limited knowledge causes them a lot of risks and issues. Well, even the law is clear that ignorance of it excuses no one.  Upon registration, review your BIR Certificate of Registration (COR) known as Form 2303. It has everything: business information, tax types applicable and a simple guide on tax deadlines. From there, you can start planning your tax compliance.

Be ready inside and out. It is not enough that you are familiar. Once started, businesses should operate so your internal structure and systems of records are calibrated to address tax compliance. Manual books of accounts should be updated, along with proper invoicing requirements, well-maintained documents and records and well-rounded professionals (CPAs) working hand in hand with your side to ensure everything runs smoothly and properly.

Always update yourself. Lastly, businesses should be equipped with relevant updates and issuances about taxes. Many businesses do not know about new requirements, increased thresholds, prescribed provisions about various situations and transactions.

ADVERTISEMENT

Fajiculay will facilitate a workshop titled “Simplified Tax Compliance for SMEs: Applying Best Practices and Approaches” on May 8, 2019, at the Inquirer Academy.

The Inquirer Academy is at 4168 Don Chino Roces Ave. corner Ponte St., Makati City. For more information about the workshop or if you would like to add your input on the article, you may email [email protected], call (632) 834-1557 or 771-2715 and look for Jerald Miguel or Karl Paz, or visit the website at www.inquireracademy.com.

Read Next
LATEST STORIES
MOST READ
Don't miss out on the latest news and information.
View comments

Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.

TAGS: Business, tax
For feedback, complaints, or inquiries, contact us.
entertainment

K Brosas vlogging for fun, not for money

July 20, 2019 12:20 AM

entertainment

Joross weighs in on the ‘KathDen’ experiment

July 20, 2019 12:10 AM

globalnation

Maranao pilgrim dies in Mecca

July 20, 2019 12:06 AM



© Copyright 1997-2019 INQUIRER.net | All Rights Reserved

We use cookies to ensure you get the best experience on our website. By continuing, you are agreeing to our use of cookies. To find out more, please click this link.