File your Income Tax Returns On or Before April 15

BIR Keeps April 15 Deadline, urges taxpayers to file early to avoid long lines 

Bureau of Internal Revenue Commissioner Kim Jacinto-Henares reminds all Filipinos that the BIR is keeping its April 15 deadline for filing their income tax returns (ITR) despite falling within the Holy Week.

Failure to submit their ITRs, Henares says will result in a penalty of 25 percent and 20 percent interest per annum.

Income tax is a portion of the gross income that is taxed by the government. The ITR breaks down the respective deductions from the gross income to arrive at the income tax that must be paid.
The BIR chief hopes that with its reinforced campaign against tax cheats, taxpayers would file and pay their correct taxes this time.

“We’ve been very consistent with the actions that we’re taking, it’s not just a flash in the pan. Hopefully people would take that very seriously,” Henares said in a news report.
It is the duty of all income earning Filipino citizens—including employees, self-employed and big business—to settle their tax obligations, which account for the bulk of government revenues.
The basic obligation of everyone is to pay taxes and the orderly way of paying taxes is through the filing of tax returns.

The BIR is tasked to collect a record P176.51 billion in taxes next month, higher by 18 percent compared with its above-target P148.99-billion revenues in the same month last year.
With its reinforced drive Henares, meanwhile, is hopeful BIR could again exceed the year’s largest monthly collection goal in April, where also deadline for filing ITRs falls.
Last April 2013, the BIR surpassed its target by 4.4 percent and registered a 28 percent year-on-year growth. This year, the BIR is tasked to collect another record P1.456 trillion in taxes, higher by 19 percent compared with its actual revenue take last year.

Learn more about Taxation with this FAQ from GMA NEWS ONLINE 

1. What constitutes taxable income?
According to the amended Tax Code, or the National Internal Revenue Code, taxable income refers to the items of gross income without the personal exemptions and other forms of deductions. (See No. 2)
Gross income includes compensation for services, such as fees, salaries and commissions; income   from business, trade or exercise of profession; interests; rent; royalties; and prizes.
Not included in gross income are life insurance, compensation for illness or sickness, and retirement benefits.
The basic categories of taxable income are compensation income (payments for  employer-employee relationship in the form of wages and salaries), business, trade and professional income (outside the employer-employee relationship), and passive income (interests from foreign and local currency bank deposits, royalties, prizes, dividends, and capital gains from shares of stock.)
Incentives—such as 13th month pay, bonuses, and other benefits—are not taxed separately from the gross income.

2. What are gross income deductions?
Only premium payments for health and hospitalization are excluded from the gross compensation income of individuals.
Deducted from the gross business and professional income are expenses paid for business or trade, including wages, salaries, and benefits of employees. Also deducted are interest on debt, taxes paid—except income tax—losses from transactions in shares of stock, depreciation or wear and tear of property, and charitable contributions.
No deductions are made under passive income.

By law employees, businesses and professionals are entitled to personal and additional exemptions.

Singles and married couples as well as those who are single or legally separated but supporting others under 21 years old or those physically or mentally challenged are entitled to a personal exemption valued at P50,000.

Individuals may also get a P25,000 additional exemption for each legitimate, illegitimate or legally adopted child as long as number of dependents do not exceed four.

3. Where can employees get a refund for excess payment of income tax?
Tax refunds must be coordinated with employers and not with the BIR.
Taxpayers may use that refund to pay their next income tax, or they may not pursue the refund so it could be used as additional government fund.

4. Who may file their income tax returns?
Resident or non-resident citizens as well as expatriates who receive income from sources in the Philippines are required to submit their ITR.
Domestic corporations which generate income within and outside the Philippines, as well as foreign firms earning within the country, are also required by law to file an ITR.

5.  Who are not required to file their ITRs?
Exempted from filing ITRs are minimum wage earners, an individual whose gross income is not more than his or her total personal and additional exemptions, those whose income has been subjected to a final withholding tax, and those qualified under “substituted filing.”
A withholding tax is “prescribed on certain income payments and is not creditable against the income tax due of the payee on other income subject to regular rates of tax for the taxable year,” according to the bureau.
Overseas Filipino workers do not earn their income within the country and are thus exempted from filing an ITR.
For more detailed explanations check out http://www.bir.gov.ph/taxinfo/tax_income.htm

Paying your taxes made easy as RFP

When I first came across the RFP video on YouTube, I think the volume on my PC was a bit too loud as I saw the kids on the street dancing to the catchy beat, unaware that it was actually a commercial by the Bureau of Internal Revenue. Even I must admit that it had an LSS effect on me.

Check out the video below:

So I guess, on that note I have to congratulate whoever did this ad for making a "cool" government ad.

The online video is part of the  “I love the Philippines, I pay my taxes right. campaign.  For this year, the tax collection target for the country is P1.456T, that’s 1Trillion and 456Billion pesos for the entire Philippines.

For a more detailed explanation all you have to do is go to the website http://knowyourtaxes.ph/ and click on the letters for the detailed step-by-step instructions.

Doctors No Longer Ask For Apology from BIR Chief

I am sharing this post for my doctor friends from CGHMC and from other hospitals as well, I hope that this will enlighten everyone with regards to the BIR advertisement  that came out a week ago.

Here is an update sourced from ABS-CBN News

Doctors will no longer demand apology from BIR chief over adBy Niko Baua, ABS-CBN News
Posted at 03/11/2014 8:27 PM | Updated as of 03/11/2014 8:27 PM

The Philippine Medical Association (PMA) will no longer ask for a public apology from Bureau of Internal Revenue (BIR) Commissioner Kim Henares over an advertisement that depicts doctors as tax evaders.

According to PMA vice president Dr. Irineo Bernardo, after a meeting over the weekend, the Board of Governors has decided that they would rather move forward with the BIR and ask for assistance in paying the right taxes.

Doctors earlier expressed dismay over the advertisement, which they called a "shame campaign" of the BIR against professionals.

The controversial ad shows a doctor perched on the shoulders of a grade school teacher, with a caption saying: "When you don't pay your taxes, you're a burden to those who do. Do your share. knowyourtaxes.ph.

The BIR, for its part, had said the advertisement does not single out doctors and is aimed at anyone who is not paying the correct taxes.

If you have anything to share. Please feel free to speak your mind.

Veteran Journalist Writes About the Controversial BIR Ad

For the past few days, there has been a lot of buzz concerning an ad from the BIR which appeared in the newspapers. The ad shows a "Doctor" riding on top of the shoulders of  a teacher with notes showing that the teacher is actually paying bigger taxes despite earning less. 

But should the doctors be offended by the ad? Here is a very informative article written by Solita Monsod in her Phil. Daily Inquirer column.

Get Real
Why take offense?By Solita Collas-Monsod
Philippine Daily Inquirer
12:28 am | Saturday, March 8th, 2014

It is not as if this is the first time we are told that a great number of professionals (e.g., lawyers, accountants, doctors), and the rest of their self-employed, “own-account” brethren, don’t seem to be paying their fair share of taxes. One certainly remembers that P-Noy made a point of it in his State of the Nation Address. It’s been written about at any time these past 20 years, including by yours truly, who also brought it out in any number of speeches in front of professional organizations.

So why has such offense been taken? What’s with the onion-skinned reaction on the part of the Philippine Medical Association? Are the accountants and the lawyers (the lawyers have not as yet been featured, and if the ad campaign of the Bureau of Internal Revenue and Department of Finance does not include them soon, there will be hell to pay) going to say that they, too, are being unfairly treated?

Only consider: Of the 1.7 million professionals registered with the Professional Regulation Commission, less than a quarter—about 400,000—are registered taxpayers. That leaves 1.3 million who are not paying taxes.  Surely it is not a leap of logic to conclude that these will include doctors, lawyers, and accountants, among others?

Then there are the studies of the DOF showing that (and I brought this out 12 years ago, courtesy of Nene Guevara) that for every P10 collected from a fixed-income earner, P1 is collected from a professional. That’s how bad it is. Surely doctors, lawyers, and accountants are also involved here.

In other words, there is enough empirical evidence to justify the ad campaign. There is nothing in the ad campaign that says, or even implies, that all doctors are tax cheats. The ad shows one doctor whose income is more than P1 million paying P7.4 thousand in income taxes, riding on the back of a teacher whose income is P852 thousand paying P221 thousand in income taxes. Then there is a message: “When you don’t pay your taxes, you’re a burden to those who do.” That is all.

From there, the PMA has proclaimed that the thrust of the ad is that the entire medical profession is a burden to the Filipino people. Excuse me? What I understood from the ad was that if a doctor earning P1 million pays only P7,000 in taxes, the doctor has to be a tax cheat. That doesn’t mean all doctors are tax cheats. But it does mean that other doctors who pay similar amounts on their income are tax cheats. That is incontrovertible. Why should anyone take offense at that conclusion?

The same thing can be said of the accountants (it was amusing that the PMA’s Dr. Leo Olarte seemed to hold the accountants to blame for any misdeclaration the doctors made). In the ad, the accountant earning P540 thousand paid P2.5 thousand in taxes, while the chef who earned P513 thousand paid P101 thousand in taxes. Notice that the ratio of tax collections from fixed-income earners (the chef, the teacher) to those of professionals is more than P10 to P1—it’s more like P30 or P50 to P1.

So let’s not make any more out of the ad than what it says: for taxpayers to pay the proper taxes. That the message was eye-catching is a plus. Come April 15, let’s do what is right for the country. Kim Henares should be cheered, not jeered. She’s a hard worker, and she needs all the help she can get.

A look at where the Philippines stands with respect to tax efforts and tax collection compared to 110 developing and developed countries tells us what kind of problems we face (Le, Moreno-Dodson, Byraktar, Tax Capacity and Tax Effort: Extended Cross-Country Analysis from 1994 to 2009).

The tax revenue to GDP ratios of high-income countries in 2009 was 29.3 percent; of middle-income countries (the Philippines is one), 19.3 percent; and of low-income countries, 13.6 percent.

If we group the countries by regions, the tax revenues as percentage of GDP in 2009 for East Asia and the Pacific (EAP, which includes the Philippines) was 14.8 percent.
How does the Philippines compare with these averages (19.30 percent for middle income, 14.80 percent for EAP)? Our average for the period 1994-2009 was 14.34 percent, or below both averages. Worse, in 2013, per Sonny Coloma, this ratio was only 13.6 percent. Nota bene: A 1-percent shortfall from the average is equivalent to roughly P100 billion.

But the study goes further. It ranks countries according to “Tax Effort Index”—the ratio of actual tax collections to predicted tax collections (based on their model which includes the effects not only of income but also of demography, trade openness, agriculture value added and governance quality). The Philippines ranks 64th with a tax effort index of 0.91, which means it is not collecting what it should be collecting. Highest tax effort index is 1.66, lowest is 0.16.
It also classifies the Philippines as a low-collection, low-effort country. A country is regarded as low-collection if its tax collection is lower than 18.31 percent of GDP and regarded as low-effort if its tax effort index is less than 1.

The study, though, offers some consolation to Kim Henares, as well as those who feel she is picking on them: It has found that in recent years, countries with better institutional quality (such as bureaucracy and less corruption) can collect higher taxes. In other words, the quality of governance has to be improved for higher tax revenues.

So what do you think? Hit the comments section and speak your mind!