To catch tax cheats in the medical profession, the Bureau of Internal Revenue has been dispatching teams of agents to doctors’ clinics. Their mission: to find out if doctors are issuing receipts to their patients as required by law. The receipts make it easier for the BIR to track the doctors’ income and determine if they are paying the correct taxes.
Last week, the BIR revealed the results of its initial sleuthing by announcing that two doctors had been caught violating the law. But if the catch seemed too scanty, its quality was even less spectacular. Sylvia Huang, a dermatologist, was found to issue receipts only upon request, all right. But Willy Go Lopez, a neurologist, had a perfect excuse for not giving one patient a receipt: the patient was his friend and was being treated for free. A convenient excuse maybe, but how do you dispute a doctor’s charity?
Thus after a few weeks, the BIR cloak-and-dagger operations seem to have produced only one useful result and that is to underscore the need to refine its amateurish, crude and sloppy detective work.
A better, more productive and precise method of catching tax evaders was simply examining taxpayers’ books. Election lawyer George Garcia, who counts former President Joseph Estrada and several senators among his clients, was found to have declared a total income of P4.45 million from 2004 to 2010. But in 2010, when he reported a total income of only P1.38 million, he bought a condominium unit worth P51.9 million. Comparing this purchase with his reported income, the BIR concluded that Garcia had underreported the latter by more than 30 percent, which is considered prima facie evidence of fraud under the tax code. The BIR placed his tax deficiencies, including penalties, at P37.9 million. And all the lawyer could say was that he was surprised by the filing of the complaint.
In the case of bank lawyer Abelardo Aportadera Jr., a comparison between the amounts paid to him by Banco Filipino and the entries in his income tax returns showed that he had underdeclared his income for 2008 by P1.8 million and for 2009 by P8.1 million. He also failed to file value-added tax returns from 2008 to 2010. The BIR said he owed the government a total of P26 million in unpaid taxes plus penalties. Aportadera promised to pay any tax deficiencies, saying he never had the intent to evade his obligations.
The sums involved—P26 million, P37.9 million, up to P50,000 in fines for not issuing receipts—no longer shock in an era when the thieving and squandering of public funds worth millions or even billions of pesos are being unearthed weekly. But they will add up to tidy sums when combined with what the BIR hopes to recover in due time.
For now the message is out and it is unmistakable: The BIR is keeping an eagle eye on taxpayers, and paying special attention to professionals. And it intends to catch the tax cheats by any means, crude or sophisticated.
About time it did, too. BIR Commissioner Kim Henares says there are 1.7 million self-employed individuals throughout the country, including some 195,000 who practice their professions, like doctors, dentists, lawyers, engineers and architects. But last year, they paid only a total of P9.8 billion in taxes, or an average of P5,764. President Aquino noted that on the basis of their average tax payments, each of these self-employed professionals, tradesmen and entrepreneurs earned only P8,500 monthly, an income “even lower than the minimum wage.”
This group of taxpayers has been estimated to contribute about 5 percent of the taxes the government collects from individual incomes and profits. In comparison, salaried employees and workers who are paid fixed wages—from whom income taxes are automatically withheld—contribute 82 percent, a very clear indication that many professionals and other self-employed citizens are not bearing their fair share of the burden of taxation. Thus, Henares has said that in auditing individual income tax returns, the BIR would give priority to those filed by professionals.
If the fear of being assessed heavy fines or being dragged to jail will not put fear in the hearts of tax evaders, the BIR is hoping public disgrace might do the trick. Which is the reason it is making a big production of announcing charges and identifying the culprits every week. A “name and shame” drive, the BIR calls it.
Whatever does the trick, the BIR should go for it. Fairness requires that every citizen is made to pay the correct tax.