Simplified system will boost prompt tax payment, says Escudero

Senator Francis “Chiz” Escudero. RYAN LEAGOGO/INQUIRER.net FILE PHOTO

The annual rush to file income tax returns could be avoided if the government would only simplify its complicated tax payment system, vice presidential bet Francis “Chiz” Escudero said on Tuesday.

While he acknowledged the Bureau of Internal Revenue’s (BIR) constant reminders for taxpayers to remit their dues early to avoid the long queues leading to the April 15 deadline, Escudero said much has to be done to encourage the prompt payment of taxes like simplifying the system.

“Our tax payment system is so complicated that small businesses need to hire an accountant to be able to pay the correct taxes,” he said in a statement.

“Not only does it discourage the prompt payment of taxes, our tax payment system also promotes corruption. We have to simplify it to avoid discretion on the part of BIR personnel. Discretion equals corruption. Minimize discretion, you minimize corruption. Eliminate discretion, you eliminate corruption,” he said.

READ: Next president urged: Prioritize tax reform within first 100 days

The senator cited a study done by international audit firm PricewaterhouseCoopers (PwC) last year, which ranked the Philippines 127th among 189 economies reviewed in terms of ease of paying taxes for businesses.

The Philippines, he said, even trailed strife-torn countries like Iraq, Iran and Afghanistan in the study called “Paying Taxes 2015,” which is an annual research done by PwC and is included in the “Doing Business” project by the World Bank Group.

The study found that in the Philippines, it takes 193 hours for a business to comply with 36 required payments. It put the average taxes and contributions paid by a Philippine employer at 42.5 percent, or 6 percent higher than the average tax rate in the Asia Pacific.

Escudero pointed out that the tax issue is not just about lowering tax rates but simplifying tax payment procedures to encourage compliance especially among micro, small and medium enterprises (MSMEs) and self-employed professionals, who comprise the second largest class of workers in the country.

“Self-employed workers and owners of MSMEs do not have the luxury of time because they rely mainly on themselves to run and market their business, find clients, do the work, and attend to administrative matters,” he said, noting that MSMEs comprise 99 percent of all businesses in the Philippines.

He said the Secretary of Finance, who has the authority to promulgate the manner in which income taxes are paid and tax returns prepared, can consider adjusting the schedule for filing tax returns.

“Lessening the frequency of filing tax returns might encourage more self-employed workers to register with the BIR and acquire a legal personality because tax compliance would not be such a burden anymore,” the senator added. CDG