MANILA, Philippines—For “hands-on” entrepreneurs, April 15 comes as a day of panic as they rush to complete the reportorial work needed to file their income taxes. Those who have more people at their command will ask their accountants to do the filing for them.
Every year taxpayers are urged to scrutinize their disclosures and ensure that they pay the correct amount of taxes.
Here are some of the most common excuses that some people in business make when confronted with the April 15 deadline (April 16 this year since the normal deadline falls on a Sunday), and the arguments debunking them.
The government is corrupt, so why pay tax?
Whether one likes it or not, the state can and will always collect taxes from its citizens. It’s the way it is.
Death and taxes, as they say. Being the citizen of a state entails the obligation to pay one’s taxes, and the government is obligated to go after tax evaders, so it is better to be safe than sorry.
A corrupt government does not lose authority over its citizens any more than a poor parent over her children.
I don’t see where my taxes go
Although the long-term benefits of taxes paid are not immediately realized, one thing is for certain: They provide the government the money needed to spend on public services. More taxes mean more roads, bridges, schools, hospitals and socialized housing.
Improved public infrastructure will mean more economic activity, which leads to more jobs, more businesses and, in the long run, economic progress.
You may not be aware of how many people have benefited from your taxes, but you yourself may have benefited from them. How many times have you visited a public hospital, sought the aid of a traffic enforcer, strolled in a public park, or used asphalted roads?
My business is only small
First question: how small is small?
Under the Barangay Micro Business Enterprise Law (Republic Act No. 9178), micro-enterprises or businesses with assets of less than P3 million are exempt from the income tax for up to five years.
Only micro-businesses are therefore exempt from the income tax, but they have to be registered first to be entitled to the exemption.
So unless you are a micro-enterprise and are registered as such under the law, you are not exempt from paying the income tax.
Consequences
You may have heard about people who get away with cheating the government for years, but sooner or later the Bureau of Internal Revenue (BIR) catches up to people who have not filed their income tax.
Taxpayers must file all tax returns that are due, regardless of whether or not full payment can be made with the return. Taxpayers who continue to not file a required return and fail to respond to BIR requests for a return may face a variety of enforcement actions, including penalties or criminal prosecution.
Not paying taxes will warrant stiff penalties and interest, resulting in an ongoing, and very expensive, relationship with the BIR.
Real entrepreneurs will always find ways
If you are a real entrepreneur, you will always find ways to reduce the amount of taxes that you have to pay without necessarily resorting to tax evasion.
Be it cutting your operational expenses, making your operation more efficient or increasing your profit, you have all the mechanisms at your disposal to bring down the amount of taxes you have to pay. After all, you are the entrepreneur!
(The author is the chairman of the Knowledge Management, Information and Communications Technology Services of the University of the Philippines Institute for Small-Scale Industries. For more information and resources about starting, managing and growing a business, visit their website at entrepreneurship.org.ph.
UP ISSI will also hold its 29th Accounting for Non-Accountants seminar on April 16 to 20, and its 4th Spreadsheet Accounting Workshop on April 26 and 27. Call 9287076 to 79 for more info.)