Tax Evasion in the Philippines

A January 15, 2013 report in inquirer.net regarding the rampant incidence of tax evasion among professionals in the Philippines was disheartening to note, not the least because these people are supposed to be professionals, and such actions are not only unpatriotic, they are utterly unprofessional and speaks volumes about the professionals' sense of professionalism and personal character. If such professionals are grossly dishonest about their incomes, how can they perform honest to goodness professional work?

The story of Greece and Italy is a warning sign. The collapse of the Greek economy last year has highlighted a very glaring reality in Greece, every year 15 billions euros in tax revenue is lost because of tax evasion. Indeed, tax evasion is a way of life in Greece. That is no surprise that such low tax collection has contributed in the social collapse of the Greek economy. The antipathy towards paying tax is so much a part of Greek culture that one eye doctor is quoted to have said: "Only the stupid pay tax." There are reports that some surgeons in Greece even earn more than 900,000 euros per year yet they don't declare any tax. This is not far away from the Philippines. Indeed, the same inquirer report I earlier quoted said that there are 3 million professionals in the country - 190,000 are doctors and lawyers who earn way significantly higher than the average office worker. These professionals earn the most, in fact, a Filipino surgeon in a far-away province earns at least PHP 300,000 per month. That is already a conservative estimate. As a nurse and as a resident of Leyte, one of the poorest provinces in the Philippines, I can attest to that. Even internists earn more than PHP 200,000.

Across all countries and cultures, doctors and lawyers, especially doctors, always earn more than the average worker. And they deserve that, however, what they do not deserve is to shy away from a social responsibility that they themselves benefit from such as roads, schools and other social services. It is sad that these professionals have a contempt for social responsibility. Of all people, they are the most educated, most revered, yet they are the ones who consistently hide from what they should lawfully contribute for the betterment of society.

Another rich European country with a history of poor tax collection is Italy. As the third largest economy in the Eurozone, Italy has a lot of potential government revenue, yet that has remained just that, a potential. Italians dislike paying taxes and most professionals do not declare tax. For a rich country, it has been reported that less than 1,000 persons declared an income greater than 1 million euros. As a result, Italy, like Greece, has been bogged by financial troubles throughout 2012.

The BIR should pursue relentlessly professional tax evaders and should aggressively prosecute them to the fullest extent of the law. This will leave a stern warning to professionals, especially doctors, to step up to their social responsibility of paying the correct amount of taxes. Otherwise, the BIR should probably lump a set of prefixed taxes to certain groups of professionals. For example, for surgeons, the BIR should set a flat rate of PHP 150,000 per year, for internists, PHP 70,000. This will I believe encourage doctors and lawyers to be fortright about their incomes.

I just cannot believe many doctors tax declarations of incomes of only PHP 10,000 per month! That is a stretch of intellectual maneuvering and is simply stupid. Unless the BIR becomes more creative in flushing out tax cheats among the ranks of the professional elite of this country, the government will continue to bleed a lot of tax revenue.