Philippines Sets Sights on the Self-Employed

March 19, 2013 Taxation in Philippines

Cesar PurisimaMANILA – The Philippines is hoping to boost national tax revenues by over 2 percent by cracking down on tax evading business owners.

In a joint statement issued on March 18th the Finance Secretary Cesar Purisima and Internal Revenue Commissioner Kim Henares announced that a new crackdown would soon be launched on tax evasion committed in the Philippines by self-employed taxpayers, including small business owners and skilled professionals.

Commenting on the planned action, the Finance Secretary noted in selected professional fields and in some geographic regions in the country, the practice of evading taxes is becoming too widespread, and he cited several examples of professionals such as lawyers and doctors, whose personal tax obligations are so low that they imply that the taxpayers receives less than minimum wage.

Currently records held by the Bureau of Internal Revenue show that there are 402 934 individuals who are registered as being self employed in the Philippines, and they pay an average of PHP 33 441 per year in tax.

However, the BIR believes that further investigations would reveal that there are nearly 1.8 million self-employed individuals in the country, and their average annual tax liabilities should be PHP 200 000.

If the BIR’s new crackdown succeeds in broadening the tax base to include the currently omitted individuals, the country could see a 2 percent boost to its tax revenues by 2016.

As a first step in the new program, the BIR will launch a new wave of extended investigations into the tax affairs of all self-employed individuals who declare tax obligations below PHP 200 000.

Photo by World Economic Forum