SOLE proprietors (SPs) and micro, small and medium enterprises (MSMEs) typically hire accountants to help them handle all the clerical stuffs ranging from tax filings, payroll processing, payroll tax filings and bookkeeping—these are the traditional jobs that SPs and MSMEs “outsource” to their old trusty bookkeepers or “accountants”. However, it is time, perhaps, that SPs and MSMEs begin to question if these are what they want.
Admittedly, the accounting profession has proliferated (not boomed) and almost one of two accounting graduates taking the board examination gets to qualify as a Certified Public Accountant (CPA). It is alarming that in my more than three years’ stay and work in the Philippines, I see the quality of new CPAs is deteriorating. Further, there is a rampant growth in lightly experienced accounting professionals jumping ship to start their own accounting practice without much exposure to the c-suite level of accounting practice (which is more focused on advisory).
It is difficult to judge whether you, as SP or owner of an MSME, has the right accountant for the job. However, there are three things for you to note to decide if your accountant is worth your time. I won’t be saying what they should be doing. For now, let’s focus on what’s to avoid.
- Tax evasion is their expertise, internal connections are their key.
The small practice firms in the country are dominated by accountants who have a bunch of connections within the local Revenue District Office and who can get you out of any tax trouble as long as your money can hit the bull’s eye. Then, happy are they who help you, for they share the proceeds from their help. They’ll teach you to buy receipts for a percent of the receipt to save you 11 percent from value added tax (12-percent VAT less 1-percent cash purchase price). They’ll teach you how to maintain two sets of books — fantastic !— God knows that they also will whistle blow you to the Bureau of Internal Revenue (BIR) to get some share from the bribe.
- Send them everything, they’ll do the magic.
I always wonder how the fixed-asset account of our business was determined by the accountant when I was young. Until now it is a wonder. Every month, your accountant’s clerk (not your accountant) will come to pick up all the documents they need to file for tax return—oh yes, just for tax return—who cares about financials anyway?! That’s the end of your communication. Quick, fast, reliable.
- Negotiation is the time to talk.
Have you ever wondered what your accountant is actually doing? You only hear from them once a year, when you have to renegotiate your retainer fee. Ah, I forgot — you also hear from them first when you get your letter of authority from the BIR (seems creepy at times that they knew it before you do—oh, well, surprise! Surprise!). You don’t really get much, if any, insight from them at all. You just talk money, money and money! Next time, try to ask them a bright question such as how the economy is doing — and you’ll be surprised once again!
These are anecdotal tales from my experience back in the Philippines, they’re fun but, at the same time, they’re shameful.
Filbert Tsai is a Filipino financial accounting advisory services executive in the United Kingdom with specialization in transaction accounting in the power and utilities sector. He had provided accounting advice to a significant number of government and financial institutions investing or providing financing structures in the renewables sector in Europe and in developing countries.
This column accepts contributions from accountants, especially articles that are of interest to the accountancy profession, in particular, and to the business community, in general. These can be e-mailed to boa.secretariat.@gmail.com.
5 comments
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Sir, as an experienced Tax Professional, what would recommend in terms of reform for the Philippines Tax System.
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Sir, in context to tax evasion, what would would you recommend to our economic managers?
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Tax evasion is a pervasive problem when tax laws and regulations are complex and fragmented. It is noticeable that in developed countries, tax laws and regulations are straight forward and easy to implement. This limits the judgment areas which can sometimes cross the boundary of legitimate avoidance to tax evasion. Further, the difficulty of implementing tax regulations from the corporate perspective effectively limits the ability to comply for willing companies.
One sample scenario is on CWTs which I had a discussion with my friend in tax advisory. There is a usual challenge in the Philippines that the holder of CWTs having the burden of proof, but considering that there are practical limitations on collecting CWTs on time, companies usually resolve to reporting CWT claims even if not completely evidenced.
A practical way to resolve this would be similar to the way that China handles its tax credits. The vendor issues government scrip invoices together with the company’s invoice which is then scanned and uploaded into the system (the scanner automatically captures and validates the one time Barcode for each scrip invoice).
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Thank you po. Have a great day.
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You’re most welcome po. 🙂