Tax reform proposal offers the self-employed a one-time filing option

Self-employed individuals and professionals may avail themselves of a simpler, one-time tax filing under the Senate version of the first tax reform package proposed by the Duterte administration, Senator Sonny Angara said Monday.

Under Senate Bill 1592 or the Tax Reform for Acceleration and Inclusion (TRAIN), self-employed individuals and professionals may choose between an 8-percent flat tax on gross sales or receipts to be filed only once a year or the scheduled personal income tax rate with allowable deductions.

Angara, chairman of the Senate ways and means committee, said the one-time tax filing will encourage self-employed workers to pay correct taxes.

The 8-percent tax is in lieu of the personal income tax—currently filed quarterly—and the monthly percentage tax.

“The Congress is making a distinction between the tax treatment of compensation income earners and self-employed individuals and professionals, because we recognize the need to really simplify the process and make it easier for them to comply and pay correct taxes,” Angara said.

Bureau of Internal Revenue data showed self-employed and professionals contribute only 15 percent to the total income tax collection, while the 85 percent is shouldered by compensation income earners.

“Self-employed and professionals—like owners of sari-sari stores and carinderia, and our doctors and lawyers—have to file their taxes on their own or with the help of accountants, which they can’t afford to hire most of the time. Kung kaya marami sa ating mga self-employed at professionals ang hindi nakakasunod nang tama sa mga regulasyon ng pagbubuwis,” Angara said.

“The previous administration opted for the scare and shame tactic, but I believe a developmental approach or incentivizing them to follow tax rules would be a more effective strategy,” the senator said.

Angara pointed out that with the proposed higher income tax exemption, marginal income earners will be exempt from paying income taxes. These include farmers and fisherfolk, sari-sari store owners, carinderia owners, market vendors, and tricycle drivers.

The value-added tax (VAT) threshold is also raised from P1.9 million to P3 million, thus exempting small businesses with total annual sales of P3 million and below from paying the sales tax. — VDS, GMA News