• My tax woes

    9

    SOMEONE please help me. The one time I’m set to earn more than usual for my editing work, I have been asked to give a receipt in exchange for my check. Which is fine, and so feeling-mature me goes to an accountant to be absorbed into the tax system where “freelancers” are seen as “self-employed.”

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    And then to my horror: I have been declared in debt by the Bureau of Internal Revenue (BIR), for what it calls “open cases,” from a past long gone, a business I never earned from.

    This is freelancer me, who lives without benefits, without security of tenure, without any of the medical benefits or social security that employment allows. This is freelancer me, not at all self-employed. Because to be self-employed is to have the money to actually brand oneself, earn from oneself, get an office, receive clients, and treat one’s skillset as a business. Which I can’t afford to do.

    And now the one time I get a check big enough so that I might get myself a health card, well, government’s tax rules have me crying like a baby.

    Someone help!

    Open cases
    In 2002, I opened a small business – miniscule really – that my father funded. An Internet shop along Katipunan Avenue that I managed with a friend. We were right beside another Internet shop, and down the street there were two more Internet cafes. Which is to say we barely broke even every month.

    In 2004, we closed shop. I was too young, too careless, to know that I needed to close the shop’s books with the BIR, or else they would continued to charge me for not filing taxes every month.

    You got it: every month.

    Fast forward to 2015, a little over a decade since. I get work that will pay me P60k, a major feat really for a freelancer. Before this, I was never asked for a receipt by the places I write for, and they’d tell me they were filing my taxes for me. Withholding tax, my payslips said. I had no reason to disbelieve it.

    In the past, I wouldn’t even earn enough to be required to file my taxes. In the past, which is to say before this version of the BIR.

    Getting back into the grid didn’t seem like a big deal to me – even as I believe it to be an injustice for freelancers like me who were being treated as “self-employed.”

    When we checked if I could get myself those receipts, the BIR revealed that I had open cases from that old business, and since 2005, they have been charging me monthly for failing to close my books with their office.

    Which means they are charging me now, for a business that closed down 11 years ago. They are charging me for a business that has been closed down since 2004, which has a business address that has ceased to exist – the building was sold and destroyed in 2006.

    The BIR is charging me P60 thousand pesos as of June 2015. Exactly the same amount I’m supposed to get if and when I finally get my BIR receipt for this rare editing gig.

    It’s like I’m earning this much for the first time, after a decade of blood sweat tears as freelancer, and all of it will go the BIR.

    Someone help me!

    Instead of kindness
    That is of course if I get my pay check at all, given the BIR’s refusal to give me a receipt.

    A lawyer-friend says that I should not have any problem getting receipts – the BIR should not stop anyone from wanting to be part of the tax system. And really, no tax office should keep any person from claiming their pay checks.

    Yet here I am, unable to claim a check because the BIR refuses to give me my receipts until I pay the P60k in penalties. I am being told I have no choice but to pay, never mind that I absolutely contest these penalties.

    I contest it on the grounds that if the BIR tried at all, they would find that all material conditions point to the fact of that business having closed down in 2004, the building demolished in 2006. In the two years it was open, it was always break even. It closed down with no profits.

    I’d like to think that this story is no different for many small businesses in the country, and one wonders why this tax office can’t be kinder.

    An example of kindness: I hold a Certificate of No Business from the Quezon City Hall. I imagine this is because instead of operating on charging people for businesses that might be long gone, this local government unit decided to operate on kindness. When they computerized their system, they presumed that if a business permit has not been renewed for a stretch of time, this means the business has closed down.

    Plain and simple. And kind. (Thank you, Herbert Bautista and Sonny Belmonte!)

    After all, why charge a business that has since closed down, for not declaring that it has closed down?

    Why charge people every month for failing to close their books with the BIR? When material conditions, common sense, compassion would point to the possibility that this business has closed down, and therefore the books are also closed?

    Someone help me!

    Instead of freelance
    At the heart of this problem is the assertion that freelancers are “self-employed,” which means treating us like moneymakers who are able to earn hundreds of thousands a year without paying the right taxes. But that is to presume that all freelancers are like doctors and engineers, dentists and real estate contractors. It’s to presume that all freelancers earn from “professional fees” that are so large, but which are never taxed.

    But the BIR would be hard put to find a cultural worker who earns as much as a “self-employed” doctor or dentist, engineer or real estate contractor. A freelancer who can afford an office, and who can afford to build herself as a brand, is a rare creature in this country. And they are totally different from people who move from contract to contract in order to make ends meet: those are the freelancers, and they earn so much less than anyone who might be considered as self-employed.

    I’m not saying I should not be penalized for having failed to close those books. I do ask that it be more reasonable, like a fixed amount instead of one that grows by the month. Or a penalty that’s adjusted according to the kind of freelancer the BIR is faced with – because there are plenty of us, and we are as diverse as it comes. A 60k penalty would be my salaries for my Manila Times columns for half a year. That has to matter, right?

    I’ve been told that I need to talk to my Regional Division Officer (RDO) in person because I need to explain my circumstances in order to get that penalty lowered. I have heard of accountants who are able to get these penalties down to a third of the original amount as well.

    But if it can be lowered unilaterally, why the need for it at all? These are penalties that BIR earns from once you apply to get your receipts. Which means that if you did not want receipts, they wouldn’t even know those open books exist.

    It’s a rock and a hard place. It’s also entirely possibly that I’m making things worse for myself by writing about taxes. But then again, at this point I’m set to lose that editing gig that pays me well, anyway, since the BIR refuses to give me my receipts, something I have a right to.

    Someone help me.

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    9 Comments

    1. Hi ms katrina..I have same problem as yours though my penalties my internet business closed due to bancrupcy,holdup and lost of computer from 2011 and I admit im wrong not to file it back then because we have many problem from my father hospitalization and death etc.. now still dont know what to do with it hence I am willing to pay installment because I am unemployed right now but my problem is it’s penalty still running until I did not pay it :( also its too difficult to process closure of it went almost everyday in 3 weeks from cityhall to bir to collect needed document and get retirement cert..from my experience I think I been tramautize and never been in my mind to put any business again..just sharing my experience as we have same sentiment..

    2. Everyone else suffers so no one should be spared. That’s some logic. What’s wrong with you? The point is that the system is broken. It should be fixed.

      • Well that is me then. Obviously you can read English but perhaps you can’t fully understand it.
        There is nothing wrong with me. I never stated “everyone else suffers so no one should be spared” but I have no sympathy with people who avoid they,re civic responsibilities by avoiding paying tax then complaining when they get caught and penalised. Yes the system is broken, one of the main failures is in the collection. Employees have no choice, the monies are withheld from their salaries along with Philhealth, pagig, sis etc. Why should one sector of the community subsidise the rest? I m not talking here of the extremely low paid who don’t earn enough to pay tax anyway, I mean the privileged many who do but don’t.
        I quote: A government that robs Peter to pay Paul can always depend on the support of Paul.
        George Bernard Shaw.
        The system needs fixing so you fix it, I can’t. I have no vote.

    3. that is how cruel our tax system is…why can’t they run after the billions being lost in PDAF and DAp, and the missing 2000 cargo containers? meanwhile pnoy can’t even give a relief to burdened tax payers by rejecting lower income tax for employed workers…daang matuwid really is a cruel joke on all of us…

    4. I truly sympathize with your problem. The BIR has been on a quest to collect a lot of taxes, by hook or by crook and they have even formulated a system whereby you have to pay a certain percentage of vat and income taxes or else you will be hounded with those dreaded annual audit letters wt a ready idea price, and since this admin started, revenue regulations are being added almost every month. This agency do not understand how difficult it is to run a business and make it a success, or at least operate at a minimal profit, much less comply with all those numerous paper works to be filed monthly, quarterly, semestrally, annually, that you have to really really hire a knowledgeable accountant just to do all these works or else how can you even focus on running your business at all? No wonder we are now ranked 103rd in ease of doing business, down 5 levels or something since last year. Its truly a pain doing business here.

    5. Hello Katrina,

      Let me help you pay your penalty, writer like you should not go through, I own a business base in San Francisco but I go home to the Philippines every year, if you need the money now I can arrange with my bank with BDO in Makati, however if you can wait I’ll be in Philippines in February maybe I can help you finance your monthly expenses until you can become self-sufficient in your editing, I will be very happy if you accept my offer. I do a lot of philanthropic work in the Philippines I mostly in education let’s leave at that. You can contact via my email tpua@rtwestern.com

    6. Poor you! It’s not my fault, I didn’t know I should pay income tax on my income, actually I never cared. 60k for 6 months. What about the farm or construction labourers, cleaners etc who work 13+ hours a day, 365 days a year for less than 1/3 of what you got for your part time job? What about all the other hard working people who pay their taxes at the highest rates in Asia to compensate for the missing revenues tax dodgers like you fail to contribute. Yes, the findings on your small Internet cafe business is harsh but you should have closed your books properly. Why should the local government authorities, B.I.R. Etc act as your free accountants / business managers? Let me expand your education a little, they do NOT work for free. We, the taxpayers pay they’re salaries and now so do you!