Editorial

BIR’s misleading list

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The disclosure by the Bureau of Internal Revenue of the list of top individual income tax payers only served to mislead ordinary citizens on the behavior of the rich and famous insofar as paying the correct taxes is concerned. The list did not capture the true amounts that individuals—tycoons and business executives in particular—actually paid in taxes in 2011. In fact, what it suggested was that Commissioner Kim Henares was just trying to please President Aquino. The top income tax payer for 2011 on the list made public by the BIR was one Kristina Bernadette Cojuangco Aquino (aka the celebrity Kris Aquino, the President’s youngest sister), who paid P49.8 million. In contrast, the Philippines’ richest individual, mall tycoon Henry Sy, is 15th in the list, with P16.5 million.

Many had expected the country’s wealthiest individuals, specifically the taipans and those named by Forbes Magazine in its annual list of the world’s richest, to top the BIR list. Instead, it was led by the President’s sister, a few financial executives, a pawnshop owner, and a TV station head. None of those in the Forbes roster ended up in the top 10 of the BIR list—not Lucio Tan, who has interests in banking, airlines and liquor (with a net worth of $2.8 billion), or John Gokongwei Jr., with holdings in aviation, financial services, and food and beverages (with a net worth of $2.4 billion).

Naturally, many pointed questions were raised. “How come Kris Aquino paid more taxes than Henry Sy Sr.?” was the complaint aired in the social media in the days that followed the release of the BIR list. Feeling a need to clarify matters, people from the Lopez group of companies pointed out that family patriarch Oscar Lopez and his brother Manuel paid P37 million and P11 million in taxes, respectively, for 2011.

This was Henares’ explanation: “Only those who filed income tax returns (ITRs) will find themselves on the top 500 list. If you did not file an ITR—if you had a ‘substituted filing’ where your company withheld income taxes for you and remitted it straight to the BIR, just like regular employees—it doesn’t matter how big your salary and tax payments are. You will not appear on the list.” But there’s the problem. Does the BIR chief mean that just because someone else had filed on an individual’s behalf through “substituted filing,” he or she should not be included in the list?

Henares also tried to explain the absence of those on the Forbes list: “You have to make a distinction between income and assets. The tycoons on the Forbes list, for example, may hold the most assets but they don’t necessarily earn the most income. There’s a big difference.” Thus, she said, Kris Aquino, who earns millions of pesos from her commercial product endorsements and TV shows, might be earning more than a mall tycoon whose assets are in the form of shares of stock. But what Henares did not say is that these stocks—more so of those people in the Forbes list—usually earn income called “dividends,” which are subjected to a 10-percent final withholding tax.

And then there’s property tycoon Andrew Tan of the Megaworld group. Like many of his wealthy peers, Tan did not find his name in the BIR list, but his tax payments were more than those of Kris Aquino. Tan, also one of the Filipino billionaires named by Forbes Magazine, paid P60.1 million in taxes for all his incomes for 2011. He paid P51.8 million in taxes representing 10 percent of the P518.1 million in cash dividends from his stock holdings. He also paid P7 million in taxes for the P22.2 million in salaries he earned from the companies he owns and worked in—or an effective tax rate of 31.5 percent. He likewise paid P1.2 million in taxes for the P3.8 million in director’s and consultant’s fees he received. All told, his tax payments for 2011 amounted to P60.1 million.

The same obviously holds true for many of those in the Forbes billionaires list. What the BIR should have done was to compile all the data it had on the different taxes paid (or at least the big ones like dividend taxes) that individuals pay every year. This way, it can present to the public the true picture of how much individuals actually paid the government in taxes. If not, it can release different lists for the different taxes paid by individuals. It should not pick a portion of what these people had paid, and make it appear to the general public that the President’s sister was paying bigger taxes than those who actually paid more.

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