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The Different Types of Tax Evasion in the Philippines

August 17, 2020

The Different Types of Tax Evasion in the Philippines

What are the different types of tax evasion in the Philippines?

  1. Failing to Register With the BIR
  2. Not Paying Taxes
  3. Over Declaration of Expenses
  4. Using Spurious Entries in Financial Books

Taxes are present in almost every kind of transaction here in the Philippines. Filipinos have to pay taxes such as Amusement Tax, Value-Added Tax, Personal Income Tax, and more. Many taxes are already paid by us when we buy particular merchandise or accord a service. The same cannot be said for other taxes, however, especially those that need to be religiously filed to the right authorities. Making yourself aware of the different types of tax evasion in the Philippines is your best bet in order to avoid receiving penalties or being held criminally liable for failure to comply. Continue reading to learn more.

Failing to Register With the BIR 

A meeting with registration papers

The Bureau of Internal Revenue lays all the groundwork for anything tax-related in the Philippines. If you’re setting up a business, you have to regularly comply with all the requirements that the BIR or the Department of Trade and Industry would be asking from you. Though there may be different rules when it comes to business registration in every municipality, it’s important that you make yourself aware of this basic information.

As a tax-paying citizen, it’s your responsibility to be regularly updated with changes and other memorandum stipulated by the BIR. Ensure that you’re always checking out their website to see if there are any changes that may affect the registration of your business. Always see to it that you’re submitting the appropriate documents to the right bodies, making sure that you do not present misleading or false information on the forms.  

Not Paying Taxes

A woman trying to get around the tax laws

If you’re working for a company, then you’ll be submitting a slew of required documents, like your Tax Identification Number. Those who fall under a certain income bracket — PHP 21,000 and lower — are exempt from paying taxes. However, the same situation cannot be said for those who may earn higher than that, as they would be left with a taxable income.

Failure to pay your taxes can get you in trouble with the law, so it’s always important that you understand the weight of your responsibilities. The Tax Code is where many of the penalties on tax evasion can be found. 

You can be held liable for failure to pay taxes if you don’t make it a point to file an income tax return on time, or not paying the tax in full. You’ll be presented with the corresponding penalties, depending on the frequency of the act. For example, in one-time breaches, you’ll be imposed with a surcharge of either 25% or 50% of the basic tax.

Over Declaration of Expenses

A paper with over declaration of expenses

Some businesses are always finding ways to get around the tax laws in the country. Though there are legal loopholes that make this possible, not every practice can easily slide under the eyes of the law. For example, businesses that may cause an over-declaration on their expenses to avoid paying a larger tax.

Once the right governmental bodies find out these types of wrongdoings, the business can be imposed with once again, a penalty. Even worse, they may also be subject to either a temporary or a permanent business closure. Going through all the trouble just to manipulate your financial books, and only resulting in business closure, is simply not worth the trouble. Just adhere to the law and practice integrity when declaring your expenses.

Using Spurious Entries in Financial Books

Spurious entries in a financial book

When you’re running a business, it’s not always a good idea to micromanage your activities. With this in mind, it’s common for businesses to hire the services of a bookkeeper who would be able to keep track of all financial-related information such as transactions, debit and credit history, business expenses, and more.

You should always be cautious in trusting people with your money. You may not be aware of it in the beginning, but your bookkeeper may already be stealing from your business by inputting spurious information in the books. If this gets in the hands of the authorities, both you and your bookkeeper will be made to answer for it. Always ensure that you’re double-checking your records so that they’re consistent and correctly-reflected by receipts and other financial documents. You certainly wouldn’t want to experience negative outcomes such as having your business shut down. 

Key Takeaway

The different types of tax evasion in the Philippines are determined by the country’s Tax Code. These evasions have corresponding penalties, which is why if you want to avoid being slapped with one, make sure that you’re able to fulfill your duties and obligations as a taxpayer. 

Make it a habit to file your taxes as timely as possible and to practice integrity in whatever transaction you engage in. Finally, the best piece of advice is to always conduct your research on the changes that may be imposed. Understanding the law is part of your job and there’s simply no excuse for negligence.