The Bureau of Internal Revenue recently issued Memorandum Circular No. 7-2014, clarifying the issues relating to the registration and tax compliance requirements of Marginal Income Earners (MIE). The circular provides that an MIE refers to an individual not deriving compensation as an employee under an employer-employee relationship but who is self-employed and deriving gross sales or receipts not exceeding P100,000 in any 12-month period. Moreover, the activities of such MIE should be principally for subsistence or livelihood. The term includes, but not limited to, agricultural growers/producers (farmers/fishermen) selling directly or indirectly to ultimate consumers, small sari-sari stores, small carinderias or “turo-turos”, drivers/operators of a single unit tricycle, and such, but shall not include licensed professionals, consultants, artists, sales agents, brokers and others similarly situated, including all others whose income have been subjected to withholding tax.
It’s safe to assume that many, if not almost all, sari-sari stores, carinderia and other MIEs are not registered with the BIR. These small businesses are now required to register with the BIR, to issueregistered receipts/ sales invoices, and use registered Books of Accounts (refer to the full text of Memorandum Circular No. 7-2014 for the rest of the requirements). It’s also safe to assume that most MIEs are not aware of the new requirements and we’re certain that the new set of regulations is going to be very, very unpopular (but as the BIR Commissioner noted, her job is to collect taxes, not to be popular). Now, if we’re tasked to look at the positive side and forced to defend the rules/requirements on Minimum Income Earners, we’d come up with these four reasons:
BIR must simplify rules
Big corporations and professionals have a hard time dealing with tax requirements. Small and medium enterprises (SME) understandably have the same problem with tax compliance requirements. These business entities have the option of hiring accountants. MIEs, owing to the fact that they’re subsistence income would hardly be enough to hire bookkeepers or accountants, must fully understand the new tax rules and the compliance requirements. For instance, MIEs should know how to properly fill up the Books of Account (what on earth is that, you ask).
The challenge for the BIR, therefore, is to make it easier for ordinary folks to understand tax rules and requirements; otherwise, considering the initial resentment expected from the imposition of the MIE tax requirements, the BIR (or the appointing authorities) may reap the backlash from the “masa” who are marginal income earners. A better and simplified system for MIEs, once in place, should spill over and benefit the rest of the taxpayers.
MIEs must factor costs of doing business
Every business, MIEs included, must incorporate all items of expense in coming up with the price of their goods or services. Taxes and incidental expenses on tax compliance requirements, must be factored in by the MIE (in fact, MIEs engaged in the food business have the added burden of complying with the new fees and requirements). Any additional cost is really a bitter pill to swallow, except that reasonable expenses for tax/regulatory requirements are necessary expenses in business. If MIEs will be “forced” to accept the new tax requirements, perhaps it would not be as hard to convince them to factor other aspects of effectively doing business.
Positive effect on regular taxpayers
We’ve heard a few ask, “Why not go after the big fish?” Valid question. However, the issue of going after the big fish (and the BIR will say that they are, in fact, running after the big fish) is entirely different from the issue of tax compliance for MIEs. If every Filipino is meant to benefit from taxes, then every able Filipino should also pay taxes. Regular taxpayers, including teachers and other government rank-and-file employees whose salaries are automatically deducted with taxes, may derive psychological upliftment knowing that everyone is on the same (tax) boat.
Stake in governance
Here’s the best part — because everyone feels the pinch in paying taxes and complying with tax regulations, everyone will have a stake in how government is being run and how taxpayers’ money is being spent. This much has been demonstrated by the people’s extreme anger over the PDAF issue. Maybe everyone will start taking their votes seriously. At the very least, anyone paying income/business tax has the moral, legal and financial reason to DEMAND that every cent of public money is accounted for and that government office is treated as a public trust. Every MIE, together with other regular taxpayers, will demand that the corresponding government service and support must be faithfully discharged in return for the payment of hard-earned taxes.
What do you think of these requirements? Positive or negative? Use the comment section below for your comments or discussions.