BIR to conduct lifestyle checks on professionals

By VG Cabuag, Business Mirror
Posted at 08/01/2011 8:48 AM | Updated as of 08/01/2011 8:48 AM

MANILA, Philippines – The Bureau of Internal Revenue (BIR) is set to conduct lifestyle checks on professionals – including doctors, lawyers and accountants – in a move to convince self-employed people to pay their proper taxes to the government.  Internal Revenue Commissioner Kim Jacinto-Henares said in a wide-ranging discussion on Friday with editors, columnists and reporters of the BusinessMirror, the Philippines Graphic and radio station dwIZ, that the agency would release to the public “by sector” the names of the country’s highest-paid professionals.
She did not say how the lifestyle check would be conducted, but hinted that it would be similar to the lifestyle checks on government officials.

Henares revealed that during her meeting with the Professional Regulation Commission, she learned there were about 3 million professionals in the country; the BIR’s database only shows around 195,000 of them are paying their taxes.

“Of course, from the 3 million professionals you will deduct the nurses and the seafarers because they are not considered self-employed anymore.” Still, she said the data reveal that the difference between the number of taxpaying and nontax-paying professionals is huge.

“We are asking people to insist that they be issued a receipt by all these professionals,” she said.

According to BIR data, the total income tax remitted last year was around P170 billion. Of this figure, only P9.83 billion came from self-employed individuals; the rest was from those employed whose companies automatically deduct their taxes from their salaries (withholding taxes).

Based on the income-tax returns filed in April, the P9.83 billion was paid by 1.69 million people who declared
themselves self-employed; they included those who run their own businesses. Professionals are included in the self-
employed category.

Finance Secretary Cesar Purisima said the tax remittance was “too small”; each of them paid only an average of
P5,800 in income taxes. Computed, this meant they declared earning only less than P20,000 the year before.

“I think they [income tax payments] should be higher. It does not make sense when you compare them with the
average payment of those who are employed. It’s not believable,” Purisima said earlier.

“We would be zeroing in on this sector [self-employed]. We are encouraging them to come forward and go to the
[BIR], and pay the deficiency tax to avoid penalties,” he said.

The BIR has said it would go after the P23.38 billion in additional revenues from the 57 tax cases it has filed under
the Run-After-Tax-Evaders program of the Aquino administration. Of these cases, six have been filed with the Court
of Tax Appeals, including that of Mariano Lim Gaw Jr., the current biggest tax-evasion case.

The BIR is seeking to collect at least P5.5 billion from Gaw for underdeclaring his income in 2007 and 2008, and
for failing to remit value-added tax returns to the government in 2008. The case against Gaw was filed with the
Department of Justice (DOJ) on August 26, 2010; the DOJ ruled there was probable cause.

Gaw, who owns Mega Packaging Corp., allegedly bought 10 parcels of land in 2007 and 2008 for P4.11 billion and
sold them for P8.41 billion within a year.

Twenty-five of the 57 cases are up for resolution at the DOJ and 12 are still under preliminary investigation.

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