by Alex Roldan
The government policy of putting benchmarks on income levels that business should be declaring makes the government revenue collectors’ work easier and reduces possible under declaration of resources utilized in the business, thus increasing the government’s revenue take. The government is dependent on taxes in order to operate efficiently, but good tax collection is not enough. Citizens should report their true incomes and pay the corresponding taxes.
It is public knowledge that there are businesses which keep at least three sets of books of accounts. One is for showing to banks for loan purposes. Another set shows the real score of the business operation that are clearly for the owner’s eyes only. The third set is for cheating the government’s tax collecting agencies. There are many other creative ways that some businesses employ to avoid paying the right taxes.
However, the government’s options are very limited. Though they have the power to prosecute businesses that cheat on taxes, the magnitude of the task to keep track of all businesses is mission impossible. Often times with the connivance of government tax collectors themselves. We were not born yesterday.
Come to think of it, only those who are financially capable have the means with which to to hire people to do the trick and with great certainty, can afford to bribe tax examiners, if they need to.
What if, particularly the micro-entrepreneurs, are telling the truth that their ventures are not really earning, or if they are, it is not what the examiners’ calculated as the tax due? This is further aggravated by local governments that, because of the nature of operation of micro-enterprises, with no proper financial records to show, “guessing” the possible profits these businesses make is always a messy process during renewal of business permits and in paying taxes.
I am talking about “micro” enterprises like sari-sari stores, small shops and the like. They are so many that declaring higher income than that of the preceding year is a must in order to justify renewal of their business licenses.
Days ago, a small furniture shop in our community declined my request to make a chair for me because they were about to stop operating. It made me wonder because as I looked around his shack, most of the sala sets and cabinets had already names attached to them for delivery to their buyers. Business must be good, I thought to myself.
He explained to me that he was forced to sell them cheap because he was closing shop. His reason: he could no longer afford to pay the taxes and business fees imposed on him by the government. “I am surrendering my permit to operate,” he said, claiming that he could hardly make a good mark up on the wooden furniture his shop produces, although he uses cheap, low quality woods like gemelina and waste cuts from lumber dealers to reduce cost. “Business has continued to decline over the years,” he lamented.
“The taxmen came to around and demanded that I should declare a profit of P300,000 for 2010,” he said, adding, “that’s not true. It used to be that, years ago, he could easily make that much, but that today even cheap alternative furniture like his is not doing well. He noticed the continuing decline of his sales about five years ago yet, however, he was still hopeful that this year his business would make a turnaround–until the taxmen came around.
When I talked to him, he was clearly confused as to where to get the money to pay his taxes and the renewal of his business permit. Worse, he was not sure what to do with his four helpers whom he could pay only what he called “allowance” along with free meals for working in his shop. He has no other recourse, but to eventually close shop.
During our discussion, I noticed that even without paying this year’s taxes, his shop is already beyond salvation. He has been relying on local moneylenders to finance his materials whenever he receives orders. He said that he wanted to improve his marketing technique, improve the quality of his product, but he just doesn’t know how and where to get assistance.
I happened to meet the owner of a small hardware store who is facing the same predicament. But he cannot simply close shop as this is his only source of income.
But we have to pay our taxes. I’m just wondering, what is going to happen to similar micro-enterprises and those who depend on them to survive? They only want to make an honest living for themselves. I can say that they are responsible citizens who are probably more dignified than many of our big taxpayers who are publicly glorified for paying huge taxes to the government – albeit probably based on what appears in their third set of books of account.
For comments, e-mail to: roldanalex@yahoo.com
