One year into the Marcos administration, how has the Philippines fared so far?
It feels like a lifetime already since we were talking about bouncing back from COVID-19, a pandemic which not only affected our health, but also our businesses. Except all of these happened just in the past three years. The effects of the great reset were felt way into 2022, when we saw a wave of professionals shifting to independent work, which we touted as “the great resignation”. We also saw poor taxpayers grow in size, the middle class shrink, and rich people increase.
During the time around the last elections, the situation was challenging for businesses, as investors found the lack of a clear economic plan from the newly-elected president troubling. Recently though, the International Monetary Fund (IMF) has forecasted that the Philippines’ GDP for 2023 will peak at 6%, noting how the Philippine economy “has achieved one of the strongest recoveries in emerging markets following the pandemic-related deep economic downturn.”
However, it may be too early to celebrate. Economist JC Punongbayan, in an analysis published on Rappler, observed:
“In 2022, the economy grew by 7.6%. Impressive as that may seem, it won’t be nearly enough for us to go back to our trajectory by 2028. In fact, with that growth, we will never be able to go back to our previous trajectory. Whatever GDP we can gain from a 7.6% yearly growth will always fall short of what we could have achieved with our old trajectory.
What all this means is that if we settle for seemingly high growth of 6% or even 7%, that won’t “return to our high growth trajectory,” as the economic managers claim we are already doing. Unless growth picks up in earnest, the pandemic would have pulled down our economy’s trajectory permanently.”
The online taxpayers on Taxumo – comprised of freelancers, self-employed professionals, and small- and medium-sized businesses – are but a drop in the ocean of the taxpaying population in the Philippines.
But this microcosm provides a very interesting and honest picture of how businesses have been performing during the past twelve months. As in the past years, we at Taxumo want to present and contextualize the experience of online taxpayers within the bigger picture in which it exists.
In this year’s State of Online Taxation, we will focus on our fellow Filipino online taxpayer’s movement and growth post-pandemic
Growth of online taxes remitted to the BIR
Where are we on the socioeconomic class divide
Online taxpayers in terms of age, city, and industry
How women and non-binary online taxpayers are performing
Who are the Online Taxpayers?
For this year’s State of Online Taxation, we will define online taxpayers as taxpayers who have paid their taxes on Taxumo within the report’s tax year. What that means is that we will only be looking at the people who have declared their incomes to the BIR within 2023. Those who have filed last year or the years before online, but have not been active since then, will not be counted in our report.
Moving forward, this is how we will define online taxpayers in our future State of Online Taxation reports.
Post-lockdowns, Online Tax Payments Show Signs of Business Recovery.
The Bureau of Internal Revenue has been making strides to ensure that tax compliance in the country increases. Their hard work has paid off: the agency has reported that they have exceeded their April tax collection targets by over 11%, collecting P336.020 billion last month – P35.114 billion higher than its P300.9 billion goal for this period.
Online tax payments on Taxumo have been experiencing exponential growth since 2020, at about 100% growth, year on year.
Do You Know the New Tax Rates in 2023?
The Philippines implements a progressive personal income tax rate of up to 35 percent.
The TRAIN Act, which was passed at the end of 2017, stipulated provisions to reduce personal income tax on all taxpayers except those in the highest income bracket.
Taxpayers in all income brackets below PHP 8 million will therefore see between a two- and five-percent reduction in personal income tax rate from January 1, 2023 onwards.
For every State of Online Taxation report, we look at the incomes declared by online taxpayers and determine their socioeconomic class based on these declared incomes.
Based on your personal monthly income, you fall under one of these categories:
- Poor taxpayers earn less than PHP9,100
- Low income taxpayers earn between PHP9,100 and PHP18,200
- Lower-middle income taxpayers earn between PHP18,200 and PHP36,400
- Mid-middle income taxpayers earn between PHP36,400 and PHP63,700
- Upper-middle income taxpayers earn between PHP63,700 and PHP109,200
- Upper income class earn between PHP109,200 and PHP182,000
- Rich taxpayers earn starting at PHP182,000 and higher
As the new normal began to establish itself with the rollout of the COVID-19 vaccination program, we noticed improvements on the socioeconomic divide of online Filipino taxpayers, as we saw more people moving upward in terms of socioeconomic class.
The share of Poor in the online taxpayers population went down considerably, from 32.7% in 2022 versus 26.2% in 2023.
Meanwhile, the Upper Middle Class and High Income online taxpayers grew by 3.8% and 2.2%, respectively.
There is insignificant to no movement with Low Income, Low Middle Class, and Middle Class online taxpayers. Rich online taxpayers did not grow as well.
How Old are the Online Taxpayers?
Every year, we also look into the age of online taxpayers, informing us which generation prefers to pay their taxes online.
Age groups or generations stated in this report are based on the Pew Research Centre definition.
Silent Generation
Adults born from 1928 through 1945
Boomer
Adults born from 1946 through 1964
Generation X
Adults born from 1965 through 1980
Millennials
Adults born from 1981 through 1996
Generation Z
Individuals born after 1996
Same as last year, Millennial online taxpayers still are the dominant segment. However, taking the second place this year are the Generation Z, a place which was occupied by Generation X in 2022.
Boomers meanwhile are a tiny 1.5% of the online taxpayer population.
In 2023, Millennial online taxpayers posted the highest income generated, making up 73.9% of all incomes declared for 2023.
Meanwhile, Generation X online taxpayers came in second, at a distant 15.8%; Generation Z is at 9%.
Which Cities Do the Online Taxpayers Come from?
This year, we saw that 14.2% of online Filipino taxpayers come from Quezon City. It is the only city in the double digits.
At a distant second is the commercial district of the country, Makati. It is closely tailed mostly by cities from the south of Greater Manila and one outside, in order of highest to lowest: Cavite, Laguna, Cebu, Paranaque, Las Pinas, and Muntinlupa.
While most online taxpayers are located in the National Capital Region, 24% are located outside NCR: in Davao, Albay, Cagayan De Oro, Camarines Sur, Bohol, and Palawan.
Which Industries are Online Taxpayers in?
In this State of Online Taxation report, we saw that more than half of the filings made by online Filipino taxpayers come from service-oriented businesses. You may wonder what these businesses specifically might be.
Some of the businesses that fall under this classification are: Events Management, Travel Agencies, Supplies, and Social Media Agencies (to name a few.)
Meanwhile, industries like IT & Tech (Software and Computer Related Services) come at a distant second. This may mean that there’s a significant number of professionals in the technology field (such as software developers and engineers) are choosing to set up their own businesses.
Medical and Accounting professionals account for 5.7% and 7.1% of the total share, respectively.
Individual professional services like Freelancing, Consultancy, and Virtual Assistance are also visible this year, as the trend of home-based, remote-work setups continue to rise.
Online Taxpayers: their Gender Identities vis-a-vis their Incomes
When you sign up for a Taxumo account, you will be asked to state the gender you identify as.
The choices are:
- Male
- Female
- Non-Binary
- N/A (for non-individual entities)
Last year, we said that women make up for about 60% of online taxpayers.
While that remains to be true, male online taxpayers dominate in total amount of online tax filings.
Now, let’s look at the differences in the income filed per gender.
In 2022, the male segment started to overtake the Female segment by 2.5%, and continued to do so this 2023.
Per segment, here’s the growth from 2022 to 2023:
- Male segment filing grew by 130%
- Non-Binary segment filing grew by 110%
- Female segment filing grew by 80%
Our Final Thoughts for 2023’s State of Online Taxation report
While we remain cautiously optimistic about the continued growth of the country’s economy, we believe that this growth must be inclusive. During the height of the pandemic, we saw how people who historically have had less power in society slide back to poverty, as weaknesses in policies and administration revealed the lack of safety nets to protect marginalized groups.
In the 2023 State of Online Taxation report, we saw that women professionals and business owners are fast trailing behind men professionals and business owners, while those who come from outside the National Capital Region continue to lag compared to cities in Greater Metro Manila. We might see greater inequality in the coming years, unless we do something about this reality.
The Philippines’ service-oriented economy is a strength that our government must focus on, much as we develop our manufacturing sector. As the World Bank highlighted: “For policy makers, it’s no longer a question of whether to support manufacturing or services, but rather how they should act to take advantage of the growing potential for services to contribute to productivity and jobs.”
We stress the importance of an inclusive, technologically-competitive business environment that provides opportunities to upskill, as well as easily expand or shift into other industries. We must continue to encourage accessible business solutions (like our online tax platform Taxumo) to give their businesses a fighting chance.
About Taxumo
Taxumo is the country’s pioneer tax compliance platform accredited by the Bureau of Internal Revenue (BIR).
Since 2016, users signed on our platform have remitted about PHP 172 million pesos to the BIR.
We continue to serve the Philippine tax paying community through our seamless platform, customer-first support, and resources to make tax compliance a breeze.