An Equitable and Straightforward Tax System

No one finds joy in the act of paying taxes. Furthermore, the idea of tax rates being increased is even more disheartening. This sentiment is particularly strong when considering the government’s inability to effectively collect taxes from the wealthy, powerful, and well-connected individuals, combined with the extravagant spending habits of the previous administration that are making a comeback under the present one. However, taxes are an inevitable aspect of life, as famously stated by Benjamin Franklin, and every citizen must fulfill their obligation to contribute financially to the government.

Unfortunately, paying taxes in the Philippines poses its own unique challenges due to complex laws and convoluted regulations. Even the most diligent citizens struggle to meet their tax obligations because of these barriers. Fortunately, there is hope for individuals, small businesses, and investors who have long felt at the mercy of tax authorities. President Marcos has recognized the problem and recently pledged to address these concerns.

To this end, it is crucial for the Chief Executive to prioritize the proposed Ease of Paying Taxes Act, sponsored by Albay 2nd District Rep. Joey Salceda, by certifying it as urgent. If passed by Congress and enacted in its current form, this legislation will simplify tax filings for small- and medium-sized businesses. It will also facilitate most tax processes being done online, as well as implementing an invoice system that expedites tax refunds, especially for automatic value-added-tax levies on transactions. Additionally, the bill proposes the creation of a specialized division within the Bureau of Internal Revenue (BIR) that caters specifically to the needs of small and medium enterprises. It is worth noting that the BIR already has a large taxpayers’ service to streamline revenue collection from large corporations and conglomerates, so a separate division dedicated to easing the burdens of smaller entrepreneurs, who comprise over 95% of registered businesses in the country, seems sensible.

Moreover, the proposed legislation should also make it easier for Filipinos to update their tax records and access basic services, such as obtaining tax identification numbers, from anywhere, eliminating the need to endure long waits at BIR offices. Technological advancements in identity verification have made it possible for banks to conduct such procedures online since the onset of the COVID-19 pandemic. Therefore, there is no reason why the government cannot adopt similar practices.

However, beyond these immediate changes, it is evident that a comprehensive overhaul of the country’s fiscal system is necessary. This includes addressing both the collection and expenditure aspects of the government. Such an overhaul aims to improve the efficiency of revenue collection while ensuring wise spending of these valuable resources in essential areas. Simplifying tax laws is a crucial part of this process. Although it is impossible to eliminate people’s natural tendency to complain when parting with their hard-earned money, a less complicated tax code would enhance compliance and, as a result, increase tax collections. Additionally, it is vital to expedite the refund process, emulating more advanced economies where excess payments are promptly returned to taxpayers by honest auditors. Unlike current circumstances, where tax disputes can persist for years, leaving taxpayers frustrated and disheartened.

Furthermore, larger businesses and foreign investors must have confidence in a fair and equitable tax system. They should not feel exploited for their financial contributions. The government should implement a tax regime that incentivizes the establishment of job-creating offices and factories while ensuring that these incentives are not abused by undeserving individuals or corporations that have taken advantage of them for an extended period.

Lastly, the government must exhibit its determination in collecting the proper amount of taxes from all individuals by aggressively combating tax evasion. Merely filing charges without follow-through and court convictions is insufficient. Convictions are essential to ensuring that tax evaders are held accountable for their actions.

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