In a full page advertisement in the Philippine Star newspaper this morning, the Philippine Bureau of Internal Revenue (B.I.R.) continues on its series of ads presumably meant to SHAME corporations into paying more taxes. I, for one, think it is a GOOD thing the government seek to collect far more taxes than it has while sitting on their rear ends for the past five decades to the detriment of the national coffers and ultimately the Philippine population’s welfare in the form of shitty public education, national roadways and highways, healthcare, housing, etc. and should take care in the manner in which they choose to shame companies. Set aside for another day the very weighty argument that even if they had the revenues, they would waste it on the likes of corrupt folks like that woman who is currently sitting in a detention cell in the nearby provinces for her alleged blatant acts of corruption.
Today’s advertisement is targeted at country-wide purveyors of Lechon, and it asks the question “Do the Top Lechon Places Pay their Taxes?”
So here are some facts for those of you who don’t want to read much further down the post that will increasingly turn into a rant as I feel my blood rising to boiling point as I type this:
1. FACT – Zubuchon was established as a corporation in Cebu very late 2009, but only opened its first restaurant in June of 2011, with just 28 seats. At the start of 2012, we had 3 small outlets, with total seating of say 80 seats. In 2012, we invested heavily in our commissary, branches and people and anyone who has followed this blog knows the company was originally set up primarily for employment generation, and to prove a point that you can employ well, pay well and deliver quality locally and ethically sourced and prepared food without going bankrupt.
2. FACT – In 2012, Zubuchon reported sales of PHP24+ million, on which we paid a whopping PHP2.99 million in output taxes, got credit for PHP1.87 million in input VAT taxes due to the heavy purchase of equipment, construction, rentals, etc. and paid a NET VAT of PHP 1.12 million. Correction — as pointed out by readers and a lawyer — Zubuchon COLLECTED VAT and remitted it to government. What about companies who collect it and don’t remit?
3. FACT – We made VERY LITTLE MONEY IN 2012 as any business owner in their FIRST FULL YEAR of business will agree THAT is not UNEXPECTED. In fact, if the BIR had BOTHERED TO LOOK UP our actual BIR filings, they would see we were in a slight LOSS situation for the year as a whole. But instead, some lazy researcher apparently looked up our GIS Filing with attached financial statement to list us as having only PHP32,697 “in 2012 INCOME TAX DUE”
which is actually based on a calculated minimum corporate income tax as a percentage of sales, as our accountant explains to me. Correction, after a comment below, I reverted to our financial statements and they do show a minimal a larger gross income, a minimal net income and taxes of 32% on that net income. So the figure is an existing figure, it just doesn’t paint a COMPLETE AND FAIR PICTURE of the business under review in a proper context placed in comparison with other lechon businesses around the country, several of whom are 10, 20 or 30 years old!
4. FACT – In 2013, the year just past, after we opened our larger outlets and a snack bar at the Mactan airport, we reported close to PHP60 million in sales for the first 11 months through November, more than DOUBLE our 2012 sales, during JUST OUR SECOND YEAR of operations. On these sales, we paid (and yes, I looked up the monthly and quarterly BIR documents on file in our office) a total of PHP7.2 million in VAT output tax, got credit for PHP3.1 million in VAT input tax, and paid a NET VAT of PHP4.1 million, with December still unreported. Correction — as pointed out by readers and a lawyer — Zubuchon COLLECTED VAT and remitted it to government. What about companies who collect it and don’t remit?
5. FACT – Our income tax for the full year of 2013 (we haven’t done a total report or audit yet though the first three quarters have already been fully paid) will be in the same neighborhood perhaps as the LARGEST LECHON PURVEYOR listed in the BIR article for 2012 or over 14x larger than our meager net profits for 2012. And that largest purveyor has been around for 25+ years, and according to government reports, slaughters some 5-7x more pigs than we do on a monthly/annual basis! Can you not see a glaring discrepancy?
So please folks at the BIR, if you are going to take a swipe at folks you think are remiss in their tax payments, at least make sure you have the facts, and not twist a single data point to make your idiotically weak and now less credible slap much more effective. I am with you in that all businesses should pay their fair share of taxes, but when you take these ads out that cast aspersions and insults on companies and entrepreneurs, make sure you take aim at those that deserve it.
1. PLEASE DEFINE “TOP LECHON PLACES” CLEARLY?!!
Please note that the BIR relies on three internet/web sources to list their “top lechon places”. What is this, the era of fingertip to keyboard research of some young BIR auditor? That’s absurd. First of all, “TOP” in the case of some of these sites, is subjective and usually a TASTE opinion… not a factual description of their likely tax liability. Thank you, btw, to choosephilippines.com for placing us on their list. In other words, for the purposes of tax, you want to list the companies that have the biggest sales of lechon throughout the country. And that is INFORMATION THE GOVERNMENT HAS, BUT WAS OBVIOUSLY TOO DAMN LAZY TO LOOK UP. All the researcher has to do is look up corporations registered with lechon as their main business in the SEC database, then look up their GIS filings and financial statements, and rank the top purveyors by sales and taxes, etc. DUH. Just because store XXX is listed as having the best ensaimada, for example, doesn’t mean it should have the highest taxes paid, the link between taste and profit is a very weak one, to say the least. For example, Jollibee and McDonalds have _______ tasting burgers, and they sell billions of them every year, need I say more about the warped logic?
Any BIR or government researcher worth his salt would have other ways to check the definition of “TOP”. Here’s just one way I can think of since they apparently didn’t teach this in Philippine or International tax audit school. Every single month in every single city worth mentioning, there is a Daily Slaughter Report from different private and public slaughterhouses by type of animal. In other words, there is government data that exists that will tell you just exactly how frigging many pigs are slaughtered, and by extension made into lechons so you can tell who the largest purveyors are — ergo the TOP LECHON PLACES. For Cebu, for example, and YES I have the actual report I speak of, here is the data for October and November 2013. Zubuchon and other lechonans typically have their own slaughterhouse licenses, for which we pay taxes, so we have full control of the process. I eliminate slaughterhouses that I cannot connect to a retail lechon purveyor (they slaughter for markets, private lechons, etc.).
October 2013 (Cebu Monthly Slaughter Report)
1. “H” Company 3,205 pigs slaughtered (though not all may have ended up lechon)
2. “C” Company 1,766 pigs
3. “A” Company 1,500 pigs
4. “R” Company 894 pigs
5. “C” Company 713 pigs
6. Zubuchon 410 pigs
7. “A” Company 397 pigs
November 2013 (Cebu Monthly Slaughter Report)
1. “H” Company 3,533 pigs slaughtered (though not all may have ended up lechon)
2. “C” Company 1,560 pigs
3. “A” Company 1,321 pigs
4. “R” Company 518 pigs
5. “C” Company 402 pigs
6. “A” Company 382 pigs
7. Zubuchon 328 pigs
So you see, even just in the city of Cebu, Zubuchon is ranked 6th or 7th in number of pigs slaughtered, and in some months, other companies slaughter up to 11x the number of pigs we do, so shouldn’t THOSE COMPANIES HAVE AT LEAST APPEARED ON THE LIST OF TOP LECHON PLACES??? And it begs the question, why didn’t the researcher think to include those companies in the “TOP LIST” — was his/her sole basis a write-up on line about good tasting lechons? Isn’t it incredible that a company that slaughters 3,533 pigs in one month, what Zubuchon slaughters in almost a YEAR, is NOT EVEN MENTIONED in the published lists of the BIR? And Manila is 7-8x the size and population of Cebu, so you would expect the above such slaughter figures to be MARKEDLY larger than a provincial city. Nationally, I would be surprised if Zubuchon was even in the top 25 companies in terms of pigs cooked, and as of 2013, we are reporting in the top 2 or 3 in terms of taxes paid???
And don’t get me started on the size of pig either. Someone who slaughters 1,000 pigs at 70 kilos each does 7,000 kilos of pork vs. someone who does 1,200 pigs at say 25 kilos each who only does 3,000 kilos of pork — JUST IMAGINE WHAT THAT MEANS FOR SALES in peso terms! And the data up top is just for Cebu, what about Manila? And the ad seems to cover mostly purveyors in Manila and Cebu, do they not darn well enjoy their lechons in Bacolod? Bulacan? Batangas?
If you want to look at another way to define top, then why not check out lechon purveyors based on number of branches, or number of seats, etc. That too would give you an idea of which such places have dozens of outlets now and who do not appear at all in the list of “TOP PLACES” in the BIR advertisement.
So when you boldly state in your full page advertisement “DO THE TOP LECHON PLACES PAY THEIR TAXES” — then at least have a credible, accurate, factual and data driven list of “TOP PLACES” from a sales and tax perspective, not some list of purveyors based on some individual person’s taste buds.
2. PLEASE DEFINE “TAXES” MORE CLEARLY!??
THE B.I.R. advertisement chooses to define “TAXES” solely as “income taxes DUE”, not even income taxes PAID. What, did they FAIL tax class in college or grad school? Are not VAT (Value Added Taxes) one of the LARGEST sources of taxes for the government from corporations? Aren’t business taxes, property taxes, license taxes and employee taxes not also TAXES THAT corporations pay? Isn’t it at best GROSSLY MISLEADING TO DUN a company in public only to discover that they pay a HUGE AMOUNT in taxes in AGGREGATE and relative to their size, their age and the quality of employment provided???
VAT Taxes – Huge, and as you can see above, Zubuchon collects and remits several millions worth.
Business Taxes/Licenses – Property taxes, business taxes, liquor licenses, health certificates, etc.in every town or municipality, etc. to the tune of several hundred thousand pesos per year for ZUBUCHON and other purveyors I am sure, appears NO WHERE in the advertisement.
Income Taxes – Yes, should be included, but are understandably low after the 12% VAT and all the other “taxes” involved.
Personnel Taxes, Philhealth and SSS Contributions – see below AND WE PAY ALL OF THIS, PLUS MORE!
Best I can figure for 2013, between net VAT remitted, business taxes, income taxes and personnel related taxes, ZUBUCHON has added PHP6-7 million in funds to the national coffers. If we did not exist, and did not open two years ago, would the government have collected that sum? DUH.
3. WHAT ABOUT QUALITY EMPLOYMENT/EMPLOYEE BENEFITS? WHAT ABOUT PEOPLE’S WELFARE!??
The advertisement focuses on taxes, but I want to broaden the discussion to people and what the government is doing about PROTECTING CITIZENS and ensuring their WELFARE is TAKEN INTO ACCOUNT. Shouldn’t that be as important a concern as income taxes?
At ZUBUCHON, we established the company with the GOAL of trying to employ better, pay more, meet all government regulations, etc. And this is apparently NOT SOMETHING ALL COMPANIES PRACTICE but Government seems ignorant or lazy to enforce existing laws and regulations. And our profits suffer at the expense of this NON-FINANCIAL GOAL.
For example, most or all of our staff have good salaries and full benefits:
80% are regular or permanent employees, and many are paid above average for their job position
18% are probationary or within their first six months, and are expected to be regularized unless they don’t pass muster.
2% of our workforce is on a contractual basis
In other words, we don’t treat staff as disposable assets. We treat them like they should be treated. And we pay all SSS, Philhealth, Pag-Ibig etc. on time and in full. We are the type of business that government should encourage and support, not cast veiled insults at in full page newspaper advertisements.
In a recent inspection of the Department of Labor, Region VII, ZUBUCHON was found to have complied on all critical labor standards, and the inspector told us it was “a pleasure” to experience an inspection wherein the company was responsive, had all the documentation and data ready for inspection, and whose employees, on random face to face interviews seemed genuinely pleased to be working for the company, etc.
So my question is, how many such companies exist in the Philippines? 20% of all restaurants? 50%? or higher? If our interviews of potential staff are to be any indication, and they are a pretty good proxy for Cebu, at least 50% of establishments they had previously worked at either rarely made any dining/kitchen crew permanent, they were often underpaid or their benefits were never remitted. Sometimes, I hear lechoneros are paid PHP50 per pig roasted, but fined up to PHP200 if they burn said pig?! And they have no benefits, no 13th month, no SSS, no silly Christmas parties with drag queens awarded ridiculous prizes. THOSE ARE THE KINDS OF THINGS GOVERNMENT STAFF SHOULD PAY MORE ATTENTION TO… BECAUSE WHEN COMPANIES MEET THOSE REQUIREMENTS, then the entire working population of the nation benefits. Companies who cannot treat their staff right, should not remain in business and that will ultimately increase the profits of companies that do the right thing. THEN after that, also work on getting the right taxes paid, or do that simultaneously if you can.
And you want to know why we had less income last year, because in just our second full year of operations, we gave HUNDREDS OF THOUSANDS OF PESOS WORTH OF FOOD & MANHOURS TO THE RELIEF EFFORTS IN NORTHERN CEBU (several months worth of profits), WHERE I DIDN’T SEE A SINGLE FRIGGING DSWD TRUCK DISTRIBUTING FOOD IN THE DOZEN TIMES WE WENT UP WITH A DUMPTRUCK FILLED WITH AID. I would much rather give our money directly to the people who need it rather than having the government get their hands on it and SQUANDER IT. What are the other headlines in today’s newspapers? “Expert confirms shelters subpar” — in other words, the government can’t even build decent shelters for storm victims two months after the storm? Tsk, tsk. And what of the alleged “rice smugglers” duping the government out of billions and billions in import taxes? I could go on and on…
How bloody ironic, our office crew cooked and donated almost a dozen lechons to Noynoy’s visit to Cebu in January 2010 to raise campaign funds during his presidential election, well before we even had a restaurant, I now wonder if I was supposed to pay a donor’s tax on that or were the folks who organized the event supposed to pay that and DID THEY PAY THAT??? Shouldn’t the BIR check on all the taxes due if any, on those types of fundraising activities??? If you want a daang matuwid (straight path) then make sure your government lieutenants charged with collecting all taxes do their jobs in a fair, factual and comprehensive manner, is all I can ask for. I don’t expect any special treatment, but neither do I expect our company to be publicly shamed, when the truth is, this administration needs at least 5-10,000 similar small entrepreneurial ventures with purpose and passion to provide real solid and reliable growth instead of blindly exporting millions of our countrymen so that other countries gain from having most of our driven, intelligent, risk-taking and hard-working citizens. No wonder so many people just choose to migrate and live elsewhere if they can.
And huling hirit, a call to the Governor’s office of Cebu. Over the years, the previous and I REITERATE PREVIOUS sitting Governor ordered dozens and dozens of lechons from ZUBUCHON for visiting dignitaries, members of Congress, celebrities, etc., and in most cases, waited months and months to pay us, but now it’s gotten a bit ridiculous, with accounts receivable running some 18 months or more. PLEASE PAY US NOW. We already paid VAT and other related taxes on those sales and you have the nerve to stiff us for the price of a dozen lechons while your government cousins at the BIR seem intent on insulting us in public? And worse, they are probably going to tell us we have to pay tax on all the food aid we gave up North to storm victims!? So if the Governor’s office pays us, we can pay the BIR the donors tax. Ridiculous. Just frigging RIDICULOUS.
And Manolo (Quezon III), yes I did notice you signed up with your Malacañan press office twitter account for Marketmanila’s twitter feed a couple of weeks ago, so hopefully you will have read this, please forward this post to our friends at the BIR so they might learn a thing or two about coming up with appropriate TOP lists and providing a bit more factual and logical context before they take advertisements out pissing off just the type of folks this government needs to start and run entrepreneurial businesses that will provide a real, local and sustainable type of economic growth for the country.
To regular marketmanila.com readers, or folks who just happened to drop by for the first time, please spread the word about this post. Don’t just blindly believe what government puts in their advertisements, it just may do a disservice and discourage people who are simply trying to do the right thing. Thank you.