On Taxes and Public Shaming: Inaccuracies in the BIR’s Delinquent Restaurants AdsJanuary 22, 2014
Forget the World’s Best 50 Restaurants, the Bureau of Internal Revenue has been busy ranking restaurants according to their tax dues and publishing their results in daily broadsheets. This so-called “Tax Watch” targets restaurants in order to “increase transparency on tax payments and to encourage people to be conscientious in paying the right taxes.”¹ The campaign is supposed to rouse the public to support restaurants that duly fulfill their tax duties.
Earlier this month, the Bureau released a full page ad in several national broadsheets with the heading “Do the Top Lechon Places Pay their Taxes?” The advertisement listed down the top lechon vendors in the country and their respective tax liabilities for 2012. Zubuchon, one of the most popular lechon places in Cebu, was listed as one of the places with significant unpaid taxes. The announcement enraged food blogger Market Man, owner of Zubuchon. He felt it was an uncalled for attack on his livelihood that was both inaccurate and misleading.
While taxes are supposed to be the life-blood of the government, is the Bureau justified in circulating such propaganda? Here are a couple of things to consider regarding the BIR’s campaign.
First things first, how are restaurants taxed?
A restaurant, like any other business, is subject to corporation tax of thirty percent of the business’ taxable income. Taxable income, for us who don’t speak Accountant, is gross income minus the allowable deductions for expenses. These include things like workers’ wages, operation costs, rentals, etc. The larger the value of your allowable deductions, the lower your taxable income (on which the thirty percent tax is imposed) becomes.
Say, you are X, a multinational fast food company. You offer at-home delivery, are open for twenty four hours, and your actual restaurants are two level establishments with a capacity for two hundred persons. Naturally, you have more allowable deductions for your expenses compared to Y, a small indie café which opens after lunch and only seats twenty six people at a time.
During extraordinary circumstances, like when your sales are so low that your gross income yields zero or below, only two percent of your gross income of the business may be taxed upon. This is called the Minimum Corporate Income Tax. Thus, a restaurant may either be subject to the normal income tax of thirty percent of its taxable income or just two percent of its gross income.
So how did the Bureau come up with their rankings? Are the “taxes due” regular income tax or MCIT? Because of this indefinite classification, the list has raised a lot of eyebrows and even infuriated some restaurant owners who think their ranking was not only unqualified but, even worse, that the facts supporting their very inclusion on the list were also inaccurate. The Bureau resorted to internet sources for “top restaurants” and then indiscriminately looked up their tax liabilities without consideration to the scale of their business enterprise or how long they have been in business.
Certainly, you do not put 8065 Bagnet or Wingman, both hole-in-the wall establishments, among the ranks of Shakey’s Pizza, a foreign franchise, or Max’s Restaurant, which has been in business for six decades. Admittedly, the first two are worthy of top billing in any number of favorite restaurants lists on the Internet. But such a subjective classification based on taste and preference should not be the basis of government action, especially if that includes being ranked in a definitive list published on a national level that has enormous potential to irreparably damage reputations and livelihoods.
What is the point of all this?
The Bureau’s ad declares that “the best restaurants don’t just offer great dining service. By paying the correct taxes, they also send children to school and provide other social services.” Supposing we were lucky enough to actually live in a country where our taxes don’t end up in a pile inside people’s bathtubs, will the taxes from restaurants really be enough to send more children to school and provide better social services as the Bureau proclaims?
While the self-serving advertisement, poorly disguised as a public service announcement, may be beneficial to those both ranked top restaurant and top taxpayer, it is unduly prejudicial to small or mid-sized establishments who just want to serve honest and good food. I am sure I am not the only one whose favorite places to eat at are hole-in-the-walls.
If the Bureau wants to boost tax collection in the country, why resort to baseless campaigns targeted at the restaurant industry? Why don’t they publish a top Senatorial taxpayers list? Or business tycoons list? Is the BIR jumping thoughtlessly into the Buzzfeed trend of listography without any real benefit? Will it even matter to the average diner whether or not their favorite restaurant is a top taxpayer?
¹ Official Gazette, ‘Tax Watch.”