Better tax compliance can hike PH growth by 3%
MANILA, Philippines – The Philippines can raise its GDP growth by 3% from taxes alone if Filipinos, especially the professionals, pay the right taxes, said Finance Secretary Cesar Purisima.
In a #TalkThursday interview on Rappler, Purisima stressed the importance of implementing an effective tax administration in bolstering the country's GDP growth.
Purisima has been working closely with revenue collecting agency Bureau of Internal Revenue (BIR) to increase compliance and target tax evaders. While tax collections grew 14.48% grew in 2012 to P1.058 trillion from the previous year, it still fell below the agency’s target of 1.066 trillion.
Purisima said that they aim to bring the tax effort up from the current 13% up to 16% by focusing on 3 key areas:
1. Income tax from self-employed individuals
The Department of Finance (DOF) and Bureau of Internal Revenue (BIR) announced on March 18 that they were going to ‘wage war’ on the self employed tax evaders.
Between 2011 and 2012, as a percentage of total individual income taxes, the sector decreased to about 6.5% from over 8% the previous year. “This sector, based on our knowledge of Philippine society, are the real princes of society,” said Purisima.
According to BIR Commissioner Kim Jacinto-Henares, there are around 1.8 million self-employed professionals (SEPs) working in the Philippines, but only 402,934 actually file taxes. “This is a very conservative estimate,” she said.
According to Purisima, their goal is to increase the number of tax payers 1.8 million and to increase the average tax collection of P33,000 to P200,000 minimum. “That’s a total of P300 billion. Which is 3% of GDP,” said Purisma.
Their weapon is information. According to Purisima, they will use information right down to the individual level as a way to drive performance and increase effectiveness.
“People will continue to abuse their position, when they know they can get away with it. But now that they know that we have information and now that they know that I’m not just focusing on big data and I’m focusing now on the lowest levels, it will be harder for them to get away with these things. It’s really about government working together,” said Purisima.
2. Increase compliance of Estate taxes
Purisima said this area notoriously has no compliance. Their goal is to increase the collection to P50 billion from an average of P1 billion over the past 10 years.
“Last year, we hit over P2 billion. Again we are going to use data from other sources to be able to help us in pushing compliance. People think the secrecy of bank deposits goes beyond debt. However once you file estate tax return, the BIR has the right to check the bank. So one of my instructions to the BIR is to go back 5 years on all those who filed estate tax returns and then we will ask for the bad movements. That will help us improve compliance,” said Purisima.
3. Curb smuggling
This goal aims to detect those that evade tax by under-declaring the value of goods. “The average right now that we collect per container is about P60,000. I believe that can be reached to P200,000 - 300,000,” said Purisima.
Purisima said they are also implementing other methods such as accrediting ports as to what commodities they can handle, asking for the import plan of major players so they know when, where and what quantities are imported and using other data that is available from the outside such as the United Nations which monitors energy consumption.
Tune in to www.rappler.com on April 4 for the full interview. - Rappler.com