Not-so-common carriers tax

I suspect many bus, jeepney, and taxi operators, and perhaps even Grab and Uber car owners, do not pay the 3% common carriers tax nor the 3% percentage tax on gross receipts.

Let’s leave the Uber- GrabLTFRB controversy for the moment and turn to what is supposed to be common but is not: the payment of common carrier’s tax by operators of public utility vehicles, particularly land transportation.

For this particular discussion, let’s limit ourselves to city buses, taxis, jeepneys, tricycles and motorcycles, and operations like Grab and Uber. Simply put, under the law, “common carriers” like these are supposed to pay a monthly percentage tax equivalent to three percent (3%) of their total receipts for the period.

Question is, do they pay the correct taxes? It is also clear in the law that drivers of such utility vehicles should pay a tax on their income, unless their level of pay is below the threshold or taxexempt. Again, are drivers paying taxes due?

The matter is clear enough for jeepneys, taxis, and buses issued CPCs or Certificates of Public Convenience. Tax regulations dictate that CPC holders are “common carriers” and are therefore subject to the 3% common carriers tax (CCT) under Section 117 of the Tax Code. But, where does this put Uber and Grab and its “partners” without CPCs?

Tax regulations as of October 2015 classify them as “land transportation service contractors,” and those who earn more than P1.92 million yearly are subject to the 12% value- added tax ( VAT). Those who earn below this limit are deemed nonVAT, but in lieu of VAT, must pay a 3% percentage tax — equivalent to the 3% CCT.

Moreover, transport operators, including transportation network companies like Grab and Uber, and their partner-operators or partner-drivers must register with the BIR Revenue District Office having jurisdiction over their principal place of business, pay the annual BIR registration fee, get the required Authority to Print (ATP) official receipts, and register and maintain books of account.

And for those who self-driven Uber or Grab cars, the usual default business address is the car owners’ residence, unless the car owner actually maintains an official business address. In the case of many jeepney operators, who use their homes as garages, they can use their home address as reference for determining their revenue district.

I point to the CCT now because I believe it has significant tax potential, and I also believe the government has a long way to go in terms of correctly and efficiently collecting the common carriers’ tax. The problem with the CCT system is that the government collects only what is declared, and has limitations in going after undeclared income.

I suspect many bus, jeepney, and taxi operators, and perhaps even Grab and Uber car owners, do not pay the 3% CCT nor the 3% percentage tax on gross re-

ceipts. I also suspect that many of them, whether or not CPC holders, perhaps the majority, are not registered with BIR. And this, to me, is an issue.

If, for example, there are 200,000 jeepneys in Metro Manila, and their operators collect a “boundary” of at least P500 per unit daily, then their minimum gross receipts can total P2.6 billion in 26 days in every month. Multiply this by 12 months and we get P31.2 billion a year. Collect a 3% CCT/percentage tax on that, and the government nets P936 million annually in taxes from jeepney operators alone.

Question is, are we collecting anything even close to that amount from jeepney operators now? Are we actually collecting any tax from them at all? What about bus and taxi operators? Are they paying the CCT? I am certain we can collect double if not triple that P936 million from taxes from taxis and buses nationwide. Add to this what can be collected from Grab and Uber, and it will be a significant amount.

I now point to the findings of my good friend, former Negros Oriental Congressman Herminio “Meniong” Teves, in a previous study regarding CCT.

He had noted that for the period 1997- 2001, percentage tax collection on common carriers (not just land but including water and air transport) was generally on the downtrend, from P1.52 billion in 1997 to only P290 million in 2001. In 2002 and 2003, collection increased, but only slightly.

He also noted in his study that the annual average percentage tax collection on common carriers during the period 1997-2003 was only P760 million, with a negative annual growth rate of 18%. On the other hand, LTO data indicate an increase in the number of motor vehicles for hire registered ( jeepneys, buses, taxis, private cars), from 252,023 units in 1997 to 302,843 in 2004. Thus, the drop in the percentage tax collection on common carriers is difficult to explain.

Meniong, who chaired the Ways and Means Committee at the House of Representatives before ending his term in 2007, added that a comparison of the basic fare rates in 1977 and 2005 also showed that minimum fares in Metro Manila and provincial routes increased by 2,000%2,500% for jeepneys, 2,667% for buses, and 750% for taxis. And yet, CCT collection had been declining.

By the way, as defined by BIR, gross receipts of public utility operators are not limited to what they earn in terms of “boundary.” For purposes of tax, gross receipts subject to CCT include “boundary,” the earnings or “commission” of the driver, expenses for gasoline, and other expenses taken from the earnings derived in the operation of the common carriers.

In short, my estimate of almost P1 billion from jeepney operators alone, which is based on boundary only, is a very conservative figure. Assuming the operator gets P500, and the driver gets P500, and another P500 was spent on diesel, the gross taxable income should have been at least P1,500 daily.

Considering 200,000 jeepneys operating 26 days in a monthly for 12 months, the tax base is P93.6 billion from jeepneys, and the CCT due is roughly P2.8 billion annually from their operators. What are we presently collecting from them? Are we anywhere close to P2.8 billion? What about from buses and taxis and Grab and Uber?

Let’s assume the BIR can actually collect P2.8 billion in taxes from jeepney operators annually. Then imagine if we can earmark that amount for jeepney modernization. Operators need not borrow money to modernize their fleets but simply apply for subsidy from the government tapping the very same taxes that they themselves paid, anyway.

The average total CCT collection for 1997-2003 was only P760 million. My estimate to date is anywhere from P1 billion to P3 billion annually from jeepney operators alone. This amount is more than enough to match the initial P1 billion funding the government is offering for jeepney modernization.

Earmarking the CCT collection from jeepneys for jeepneys might just make sense, provided the jeepney industry is benefitted directly, and public service improved as a consequence. That is, if jeepney operators will pay tax correctly, and the government will collect tax efficiently.