Death and taxes

I don’t know if it is just because of our age group, but it seems that too many friends, spouses of friends, acquaintances and relatives have been dying these past few weeks. And Facebook is not making it easy. It used to be that the obituary page of the newspapers can be avoided if one is depressed enough. Now, obits are unavoidable on one’s Facebook news feed. 

I don’t like going to wakes, specially if the one I know happens to be the one in the urn or in the coffin. I want to remember people I care for in their lively best. And I am ill at ease trying to strike a conversation with the deceased’s relatives I am meeting for the first time. I am always afraid that relating good memories may just make them break out in tears.

But death is unavoidable. Modern medicine may postpone it but sooner or later, the grim reaper catches up. So we learn to deal with death as best we can. We have religion helping us cope with the loss… making us look forward to eternal life in heaven or to be welcomed in the afterlife by I don’t know how many virgins if you leave this world fighting for your faith.

Death is sad, inevitable and necessary. The old must give way to the young. That’s the circle of life. We surrender to the inevitability and necessity of death.

And then, there are taxes.

I am sure that when they set the deadline for paying income tax around Holy Week, they were hoping that we are in the mood to accept the inevitability of this temporal punishment. We would also be so guilt stricken with our sins so as to be disinclined to add one more by lying about our taxes. Remember: Give to Ceasar what is Ceasar’s except for us now, it is Cesar and he has a family name, Purisima.

Today, I intend to close my eyes, heave a deep sigh of resignation as I instruct my accountant to choose standard optional. I end up paying more but avoid adding to my litany of future sins as I justify every deduction claimed on my return. Err on the side of honesty, so to speak, even if it hurts.

Death and taxes are the gruesome twosome of life. Indeed, after death, the tax man or woman cometh next. I understand that every hospital, every undertaker and every banker is obligated to report deaths as they happen to the BIR. And as Kim Henares once reminded during a TV talk show, the tax people have a right to examine the tax record and the assets of the deceased going back five years.

Yes, five years! So I shake my head when people tell me they are calling close relatives and friends by phone to announce someone’s death because they do not plan to publish an obituary until they have fixed the deceased’s accounts. Kim is so ahead of you, folks. Nothing you can do after someone’s death matters in terms of putting one over the taxman. Computation of tax due will go back five years. Bank secrecy ends with your last breath.

Some say it is unjust for government to take a portion of what you are leaving behind to your heirs. You worked for it and you already paid taxes for all that. A death tax, as what some people call the inheritance tax, is most cruel specially for those who have just enough to maintain a lifestyle after the loss of the principal rainmaker in the family. Some even have to sell their ancestral homes to settle this death tax.

Cruel, it probably is but it is the law. And the law is likely based on social equity. It is probably designed to redistribute wealth and also so that we don’t end up with new generations of goof-offs who do nothing but live on the fruits of an ancestor’s labors.

Indeed, we have of late heard of people like Bill Gates, Warren Buffett and Anderson Cooper who told the world they do not believe in inheritance. Gates said his children will get a few millions, but the billions under his name go to a foundation that is even now working to relieve the pain of suffering and death among less fortunate human beings.

CNN reporter Anderson Cooper (Korina Sanchez must remember him) said last week that he won’t receive any kind of inheritance or trust fund upon the death of his 90 year old mother, the fashion designer and tycoon-descendant Gloria Vanderbilt. “I don’t believe in inheriting money,” he said. “I think it’s an initiative sucker. I think it’s a curse,” Cooper went on to say. “Who has inherited a lot of money who has gone on to do things in their own life?”

To answer Cooper, his mother did just that. Gloria Vanderbilt built her own fortune in fashion out of her inheritance from a family fortune made in railroads and shipping in the late 19th century. 

But we know what Cooper means. “From the time I was growing up, if I felt that there was some pot of gold waiting for me, I don’t know that I would’ve been so motivated,” he said.

For us, paying our proper taxes is a patriotic duty. Never mind that some of the folks we elect and entrust with our tax money have larceny in their hearts. Our country still needs the wherewithal to run a government of some kind. We should pay our taxes and just elect more honest men.

Our national budget is in the vicinity of P2 trillion, but in 2013 total taxes collected by the BIR was only P1.2 trillion. Total income taxes collected was just P684,378.80 million, out of which P200,776.05 million was collected from withholding on wages of employees.

Tax compliance in 2013 for everyone else had been rather dismal. The number of registrants (single-proprietor/professional/MIEs) is 2,322,881 and the number of income tax returns filed is 566,845, which would mean, more or less only 24.4 percent of the total registrants are filing and paying their income tax returns.

Economists have what is called the tax effort ratio to measure how well a government collects taxes. The targeted Tax Effort Ratio (TER) international benchmark is 18 percent for low income countries, 25 percent for middle income countries, and 40 percent for high income countries.

Ours for 2013 was set at just 13.31 percent, while actual TER achieved was 13.29 percent.  Of the targeted TER for 2013 of 13.31 percent, the portion attributable to the Bureau of Internal Revenue was set at 10.3 percent.  Actual BIR performance was at 10.54 percent, exceeding target by 0.24 percent or an increase of  0.53 percent from that of 2012. The targeted TER for 2014 is set at 14.55 percent. Our Asian neighbors have a TER of around 16 percent.

For the year 2013, there were 22,271,845 registered individual taxpayers out of the total number of 22,989,825 registered taxpayers. Some 12,076,663 were local employees or compensation income earners who are either covered by the substituted filing scheme or who are required to file BIR Form 1700 if not covered. For the same year, 2,212,977 Income Tax Returns (ITRs) were filed and out of this number, 129,623 filed BIR Form 1700 (Annual Income Tax Returns for Individuals Earning Compensation Income) and 566,845 individuals filed their BIR Form 1701 (Annual Income Tax Return for Self-Employed, Individuals, Estates and Trusts).

No wonder many of us are feeling the heavy burden of taxes. I realize a large number of our population are poor and paying no income tax. There are so few of us actually paying taxes, so few of us carrying the burden of financing government. There is this nagging feeling that the very rich are not paying their rightful share of the burden, thanks to their crafty accountants and tax lawyers.

This is why, as I had written the other week, we need to support the campaign of commissioner Henares to publicize details of our tax paying habits. I like how they are breaking down the numbers to show us how top corporations, professionals and those on the list of richest Filipinos are paying their taxes. A name and shame campaign is warranted.

The only way we will start to feel good about paying taxes is to be reassured that everyone is paying his share according to income and/or net worth. It also helps a lot if we know the taxes we pay do not end up buying condos for people like Mrs Napoles and her co-conspirators in Congress and in government agencies.

Good Friday happens this year on a Tuesday, April 15, the last day for filing income tax returns. I look forward to the day when I can sign that tax payment check with gladness and patriotism in my heart. Today, it is as if a dear one died.

That’s life!

Boo Chanco’s e-mail address is[email protected]. Follow him on Twitter @boochanco