Finance Secretary Carlos Dominguez has called on tax management professionals to encourage taxpayers to pay the right amount of taxes instead of finding “loopholes” for their clients to get away with tax evasion and avoidance.
Dominguez said in a virtual event yesterday while the government was able to surpass its 2021 revenue targets, with collections last year 9 percent higher than in 2020, the numbers show that the effective tax rate for the value-added tax remains at 5 percent against the legal rate of 12 percent.
The effective rate for the corporate income tax before the Corporate Recovery and Tax Incentives for Enterprises Law took effect last year stood at only 9 percent against the legal rate of 30 percent, Dominguez also said.
Dominguez traced such “yawning discrepancies” between the actual legal rate and the effective tax rate to the practice of tax evasion and avoidance resulting from expert “tax management” by professionals for their taxpayer-clients.
While these “tax management” practices might serve to improve the profit margins of taxpayers, such schemes prevent the government from collecting enough to invest in productive projects, he said.
“Had the government been able to collect all taxes due, we would have had more funds to cover our economic investments, debt service and COVID-19 response expenditures. We would have borrowed less. The government would have been better able to invest in building the prosperous future our people deserve,” he told members of the Tax Management Association of Philippines (TMAP) during the organization’s induction and inaugural general membership meeting for 2022.
“In sum, the government needs all the revenues it can get to meet the challenges of the time. I, therefore, urge the TMAP to help the government fill in this revenue gap and not widen it further. Tax management should mean raising funds sufficient to allow investment in public goods,” Dominguez added.
Dominguez pointed out that for “some professionals, tax management means finding the loopholes and uncovering the means for tax avoidance. This is probably the more lucrative side of your profession. But it is not the most patriotic.” Angela Celis
