Benefits of Paying the Right Taxes

Paying the right amount of tax has been one of the serious topics concerning most income earners in the Philippines.

Many, if not all, wants to as much as possible reduce the amount of tax they will have to pay to the BIR.  As such, they engage to all kinds of ways to reduce their tax obligations, such as tax amnesties, tax avoidance and even tax evasion.

In this article, we would like to present to you the list of benefits in paying the right amount of taxes in the hope that you will be encourage to do so

No\Minimal BIR Audit

Oftentimes, the reason you or your business receives letter of notice from the BIR, is caused by the following:

• Failure to file and pay tax return, or
• The BIR is questioning the amount of tax paid, or
• Both

By paying the filing and paying the right amount of tax, it will minimize the instances that BIR will audit your accounting records.

The BIR does benchmarking based on industries, and if the taxpayers tax payments falls below the said benchmark, there’s a high probability that the BIR will audit the said taxpayer to validate the deficiency. On the other hand, the BIR do not audit taxpayers who pay taxes above the said benchmark.

If you want to eliminate BIR Audit, start paying the right amount of taxes.

Peace of Mind

Being audited by the BIR may cause high amount of stress especially to taxpayer who intentionally or illegally, decreases their tax payments. Sometimes it can affect even your personal life which gives you sleepless nights and anxieties.

If you pay the right amount of tax, you can eliminate these stress and anxieties. You will have more peace of mind and you can focus in growing your business.

Truthful Income Tax Return

Some taxpayers, who do not file the correct amount of tax, encounters problem when they need to generate an Income Tax Return for purposes of VISA and Loan applications. As such, they resort to preparing inaccurate income tax returns in order to produce the said requirements.  The risk on producing an inaccurate tax return is high because if the agency verifies it to the BIR, it will cause big trouble.

However, if you are diligently filing and paying the right amount of tax, it’s easy to produce accurate income tax return without any risk.

Good Credit Rating

Paying the right amount of tax provides good credit rating to financial institutions and agencies.  The higher the income and tax you declare, the higher the credit rating. You can use your good credit rating when getting a loan for additional funds for the expansion of your business or other purposes.

Good Investor Value

In order to grow your business, at some point, you will need people or institutions with money that are willing to invest in your company.  These investors will look into your financial and tax records to support their investment decisions.

Maintaining a truthful and accurate accounting and tax records will boost confidence of investors. On the other hand, fraudulent and inaccurate will create an impression that the company is not trustworthy to invest with.

Social Responsibility and Contribution to the Country

Paying the right amount of tax is a social responsibility to the country. The taxes we pay will go to the government funds that will be used in developing and improving the government facilities and life of Filipinos, inside and outside our country.

If all income earners will pay the right amount of tax, the government can collect more money to support its objectives such as building roads, schools, better government salaries and improve government services. These factors can help attracting more investors and jobs in the Philippines. More people having jobs, means more people having money to spend which will directly or indirectly improve your business as well.

On the opposite, if all income earners will illegally reduce the amount of tax obligations, the government will have no funds on hand and will resort to availing private or foreign loans in order to govern the country. There will be lesser funds to build roads, schools, infrastructure, lower wages that decreases morale which leads to poor government services. In this scenario, the cycle of poverty will continue because investor may cease from investing in the Philippines which will reduce jobs and increase poverty. With less jobs in the country, people will have less money to spend and less potential customers to your business. Crime will increase which may also directly or indirectly affect your family and your business.