In an article published in BusinessWorld, ACG Founding Chairman and Chief Tax Advisor Mon Abrea proposed a more equitable and efficient tax regime.
“The idea behind this proposed tax regime is really to focus the government’s efforts on places where it matters,” Abrea wrote.
The tax regime proposal, supported by data from World Bank and the Bureau of Internal Revenue, sought to introduce changes to various classifications of taxpayers by focusing their collections on medium and large businesses instead of on micro and small enterprises.
The proposal sought to increase the coverage of “marginal income earners” to those who are earning not more than P1,000,000 per year. Under the present rules, “marginal income earners” are those who earn not more than P100,000 – which is too low.
“With the soaring inflation rates, the P100,000 annual sales is clearly not enough to encompass those who are truly marginal income earners,” the tax advocate explained.
As marginal income earners, the proposed tax regime seeks only to impose a fixed P1,000 tax since the focus shouldn’t be collecting taxes from these businesses.
The tax expert also reiterated his proposal to get rid of the “random” BIR audit, and to focus instead on auditing entities from which the BIR can collect more.
This means that, for small enterprises, they should only be audited if they are high risk. For medium and large enterprises, however, they should be subjected to the risk-based audit as well as a regular audit. The BIR should focus on these entities because they are the businesses that are actually earning a lot, instead of subjecting small businesses to BIR audit.
Read more about the article here.