Interesting Trends in Online Taxation in the Philippines

Whether you are an employee, a freelancer, someone thinking about starting a business in the Philippines, or someone well into their entrepreneurial journey with an established company, it’s important to be familiar with the trends in online tax filing.    

The top taxpayers are freelancers  

Data from Taxumo, an online web-based tax filing and payment platform in the Philippines, shows that 55% of the total amount of tax collected from its user base, came from freelancers. Taxumo processed ₱7.8 million worth of tax filings since its launch back in December 2016; with over half of this being contributed by freelancers, it shows the rising contribution of the segment to the country’s economy.           

Millennials dominate  

Millennials dominate Taxumo’s online taxpayer population with 75.9% of the share, distantly followed by the soon-to-be up-and-coming Gen Z, who holds 19.6% of the pie. This is followed by the combined generations of Pre-Boomers, Boomers, and Generation X, who make up just 4.5% of the platform’s online taxpayer population.    

This mirrors the fact that millennials now make up the largest generation of the workforce. Far from being the ‘entitled’ and ‘snowflake’ generation, this data shows that millennials are coming into their stride and making significant, impactful contributions to the Philippine economy.    

Note: The definition of these generational groups are based on the official guidelines set by the Pew Research Center.         

Which RDOs collected the most tax?  

The Regional District Offices (RDOs) which made the greatest tax contributions are Taguig, which collected just over ₱1.5M, Pasig with almost ₱600K, and Paranaque taking third place with around ₱500K.

In terms of the RDOs with the most tax filings, Paranaque comes up trumps, followed by Taguig, and then North Quezon City.

The importance of tax filing for the self-employed

The majority of Taxumo’s tax filers consist of freelancers – such as consultants, writers, virtual assistants – rather than business enterprises. This demonstrates that those in the fast-growing Philippine freelance sector are becoming increasingly empowered and accountable for their financial obligations.

Steven Sune, a freelance video editor said: “It’s very important because our tax returns are the only way self-employed professionals can prove that we have a steady flow of income. We don’t have a certificate of employment, payslips and the like and most of the time you need to prove a steady income when applying for a visitor visa, credit cards, and loans. The ITR is the only way we can prove that we are earning”.

When asked why he chose Taxumo to file his taxes, he said: “When I registered as self-employed in BIR, I realized I had no idea how to fill up the forms and pay my taxes. I didn’t have time to learn and do all of the paperwork. I found out about Taxumo because I wanted to find a convenient way to file and pay my taxes.”

“These figures have definitely helped us affirm our role further in enabling freelancers and SMEs to ‘get legit’ and stress less about taxes. We are continuously improving our services, by ultimately working towards automating the whole tax process. This is aligned with our mission of helping many more Filipinos start and grow their own businesses.” says EJ Arboleda, Founder, and CEO of Taxumo.

The data presented suggest that freelancers and millennials are significant contributors to the economy of the Philippines, and have a greater awareness of and are more proactive with their tax filings.

*Note:

• As published by The Philippine Star 2016, BIR deputy commissioner for Operations Nelson Aspe said only 30 million out of the estimated 103 million Filipinos are registered taxpayers. That is less than a third of registered Filipinos that pay income tax.
• According to the Philippine Statistics Authority (PSA), Annual Labor & Employment Estimates for 2017, there are approximately 11.2 million freelancers which make up 27.8 % of the total employed in 2017.

Taxumo is the easiest way for small business owners, self-employed professionals, and freelancers in the Philippines to prepare, file, and pay their taxes. With Taxumo, all you need to do is put in your income and expenses, and Taxumo does the rest: from computing your tax dues, to filling up BIR tax forms and paying taxes online.

Photo by bruce mars from Pexels