Tax exemption for small businessmen pushed in Senate

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Tax exemption for small businessmen pushed in Senate
Senator Aquino says subjecting small businessmen to income tax payment is an added burden to the poor and contrary to the mandate of the Constitution

MANILA, Philippines – In response to a what he called an “anti-poor” Bureau of Internal Revenue (BIR) circular, a neophtye senator has filed a bill seeking to exempt small businessmen from income tax payment.

Senate Bill 2227 is proposing the grant of income tax exemption to marginal income earners (MIEs), including farmers, fishermen, tricycle drivers, small sari-sari storeowners and other micro-entrepreneurs.

SB 2227 defines MIEs as self-employed individuals who earn not more than P150,000 annually and as such, should be spared from paying income tax, just like minimum wage earners.

“Granting income tax exemption to minimum wage earners while subjecting our small businessmen to income tax is contrary to the mandate of the Constitution, there being no substantial distinction between them in terms of earning capacity,” Aquino said in his explanatory note to SB 2227.

The senator, who chairs the Committee on Trade, Commerce and Entrepreneurship, filed the bill after the BIR released Revenue Memorandum Circular (RMC) No. 7-2014, compelling micro entrepreneurs to file income tax returns.

The BIR circular, addressed to all internal revenue officers, clarifies the issues on the registration and compliance of requirement of marginal income earners (MIEs) pursuant to Revenue Regulations No. 7-2012.

Under Revenue Regulations No. 7-2012, MIEs refer to individuals “whose business do not realize gross sales or receipts exceeding P100,000 in any 12-month period,” who do not derive compensation as employees but  are self-employed  for subsistence or livelihood.

The BIR circular clarified that MIEs, as defined in the BIR’s 2012 regulation “shall include but not limited to agricultural growers/producers (farmers/fishermen) selling directly to ultimate consumers, small sari- sari stores,small carinderias or “turo-turos,” drivers/operators of a single unit tricycle, and such, but shall not include licensed professionals, consultants, artists, sales agents, brokers and others similarly situated, including all others whose income have been subjected to withholding tax.”

Aquino criticized the BIR regulation, calling it a burden on the poor.

“Charging taxes does not help them in any way. Rather, it becomes a burden to a sector that is situated below the poverty line. Imposing income tax on our small businessmen is tantamount to confiscating what little income they are able to make on a daily basis,” he said. 

The proposed measure also exempts MIEs from the 12% value-added tax and any percentage tax imposed under the National Internal Revenue Code of 1997 since they are not engaged in trade for which these taxes are imposed, Aquino said.

“Such a measure provides an enabling environment for our Filipino people to thrive and be given a chance to succeed.  It further continues our campaign in achieving true inclusive growth for everyone, even for the poor and marginalized,” the senator said. – Rappler.com

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