The Adverse Consequences of Evading Taxes in the Ph
As a business owner, you have other responsibilities apart from running your business. You have to be responsible for your tax dues because this is your social obligation for the betterment of the country. After all, the government funds projects and programs with your tax dues. Admittedly, it’s tempting to disregard filing and paying your taxes since it is not easy to part away with the money you worked so hard for.
You might also be unsure of whether the government will make good use of the taxes you pay. However, you must remember that though filing and paying your taxes here in the Philippines is stressful and daunting, it is nothing compared to the problems you will encounter when you don’t pay you’re the correct taxes.
Avoid the adverse repercussions of tax evasion at all costs because these will reduce your profits. These are penalties you would not want to deal with. According to tax services in Manila, as a taxpayer, you need to be aware of the consequences because this will hurt your finances and your reputation. And with knowledge comes power because you can learn to avoid these common tax issues.
Remember, when you get convicted for evading taxes, you would be spending more money than you would if you took your tax obligations seriously. It’s even cheaper to ask for help from accounting services in the Philippines than pay interest arrears. Here are some of the consequences you will encounter when you disregard your responsibility as a taxpayer.
1. Imprisonment and Heavy Fines
If you are proven guilty of evading tax, you will have to pay a fine worth less than 500,000 PHP but not more than 10 million PHP. You could also get imprisoned for more than 10 years but less than six years if you attempt to defeat or evade tax.
The grounds for this penalty are the following:
- Sales, receipts, or commercial invoices without BIR’s authority
- Having Multiple Sets or Double invoices and receipts
- Having receipts and invoices with no business names, numbers, and other business-identifying information
2. Temporary Closure of Business
Your business could be suspended or shut down until the payment of the taxes dues and corresponding penalties are settled. The BIR conducts this under its program called ‘Oplan Kandado’ which runs after businesses that don’t pay the right taxes.
The grounds for this penalty are the following:
- Failed in issuing invoices or receipts
- Failed in filing a value-added tax return (VAT)
- Purposely under-declaring taxable sales by 30% or more
- Failed to register the business with the BIR
3. 20% Annual Interest on Unpaid Taxes
If you are unable to fully pay your taxes, your remaining unpaid taxes will come with an annual interest of 20% until the full amount due is totally paid. For example, If you fail to pay your tax in full for 5 years, you will have to pay twice as much as the original tax amount. Delaying payments will compound your tax dues.
4. 25% or 50% Surcharge of the Tax Due
If you fail to file and pay your tax due, the Tax Code will impose a 25% penalty on you. This penalty also applies if you fail to file your ITR with the wrong RDO. If you deliberately failed to file your tax returns and if you falsified your tax returns, you will be penalized a surcharge of 50%.
5. 1/10 of 1% of Annual Net Income Penalty
If you fail to transmit your sales data, a 1/10 of 1% of your annual net income penalty will be imposed. According to tax and audit services in the Philippines, it will be based on your annual net income and can be seen in your audited financial statements for the second year just before the taxable year. Do take note that this penalty will not be applied if the failure to pay the report sales is because of uncontrollable and unpredictable events.
6. Compromise Penalties Ranging from ₱200 to ₱50,000
Sometimes, BIR will not file a criminal charge or tax evasion case against you. Instead, they will impose a compromise penalty fee for the amount of unpaid taxes that you have. The penalty fee will depend on how much unpaid taxes you have incurred. It would usually range from ₱200 to ₱50,000. The higher unpaid taxes you have, the higher the compromise penalty fee you have to pay.
If you fail to pay your tax, you will have to face the consequence. You could either be subject to audits, hefty fines, or even get imprisoned. Be a responsible taxpayer. Ensure that your taxes are up-to-date so you will not fall behind on your taxes.If you need assistance with tax compliance, call our accounting services in Pasig, Metro Manila. We have a free 30-minute consultation to help you sort out your books, so you can be on your way to proper tax filing and compliance.
