Thinking Allowed – Business closures and taxation

by Nicasio Angelo Agustin
Last week, the closure of 46 branches of a bakery chain made gained significant mileage in local news. Personnel from the district revenue office of the Bureau of Internal Revenue were shown in news photos padlocking business establishments in the region and putting up tarpaulin signs that said these businesses would be temporarily closed until they complied with their obligations as corporate citizens.
News footages also revealed the calm with which the spokesperson of the bakery chain reacted to the forced closure; he acknowledged that the BIR was just doing its job and said that the company was in the process of rectifying its shortcomings to government. 
Local business leaders have reacted to the massive closures with fear and apprehension.  This is understandable, considering that their advocacy is the creation and stimulation of a positive climate for investment inflows to the region. They say that such aggressive moves by government are discouraging potential investors, and will undermine their efforts in promoting Davao as a center of trade.
The National Internal Revenue Code mandates commissioners or their designated representatives to enforce the temporary closure of establishments that have been found wanting in meeting their obligations as provided for in Section 115. I assume that closure is implemented after careful scrutiny of business records, using guidelines provided by law, based on an objective assessment and investigation and after attempts to dialog with the business owners themselves. This would make moves of something as aggressive as the actual padlocking of an establishment a legal imperative – and I believe these moves are never done on a whim or based on mere suspicion or unsubstantiated accusation.
However, if these prerequisites are not met, then even just one day of closure is unfair and painful – not only in terms of lost opportunities and profit but also in terms of the workers who are typically paid by the day in these establishments.
The business community has the right to challenge government on the legality of its actions leading to forced closure – this is provided for in Section 228 of the internal revenue code. However, this challenge should only be made and met when it respects due process and the questions substantiated.
Businesses are required to pay taxes because that is their obligation as a corporate entity. Taxes are imposed to enable the government to provide basic services to the community. When a business fails in its obligations – whether unwittingly through tax avoidance, illegally through tax evasion or any of their derivatives – they lose the opportunity to contribute to the betterment of the less privileged sectors of society who are dependent solely on government.
Majority of large establishments espouse the concept of corporate social responsibility (CSR), but this becomes mere rhetoric when a business does not pay correct taxes. More than anything else, the payment of taxes is the first responsibility of any business person or entity.
Nevertheless, CSR through the payment of taxes becomes fully realized only when government exercises prudent and judicious use of the resources given by responsible corporate citizens. After all, taxes are the result of the hard work, perseverance, sacrifice, blood, sweat and tears of every single Filipino entrepreneur who dared to dream of a better life. Taxes don’t appear out of thin air – it would be such a waste if they were just wasted.
Closures are necessary to ensure that responsibilities are met.  However, responsibility does not rest on the shoulders of the business sector alone.
Feel free to send your comments to You may also visit for my past articles and personal blogs.