During the 17th and 18th centuries, the
Contador de' Resultas served as the Chief Royal Accountant whose
functions were similar to the Commissioner of Internal Revenue.
He was the Chief Arbitrator whose decisions on financial matters
were final except when revoked by the Council of Indies. During
these times, taxes that were collected from the inhabitants varied
from tribute or head tax of one gold maiz annually; tax on value
of jewelries and gold trinkets; indirect taxes on tobacco, wine,
cockpits, burlas and powder. From 1521 to 1821, the Spanish treasury
had to subsidize the Philippines in the amount of P 250,000.00
per annum due to the poor financial condition of the country,
which can be primarily attributed to the poor revenue collection
In the early American regime from the
period 1898 to 1901, the country was ruled by American military
governors. In 1902, the first civil government was established
under William H. Taft. However, it was only during the term of
second civil governor Luke E. Wright that the Bureau of Internal
Revenue (BIR) was created through the passage of Reorganization
Act No. 1189 dated July 2, 1904. On August 1, 1904, the BIR was
formally organized and made operational under the Secretary of
Finance, Henry Ide (author of the Internal Revenue Law of 1904),
with John S. Hord as the first Collector (Commissioner). The first
organization started with 69 employees, which consisted of a Collector,
Vice-Collector, one Chief Clerk, one Law Clerk, one Records Clerk
and three (3) Division Chiefs.
Following the tenure of John S.
Hord were three (3) more American collectors, namely: Ellis Cromwell
(1909-1912), William T. Holting (1912-1214) and James J. Rafferty
(1914-1918). They were all appointed by the Governor-General with
the approval of the Philippine Commission and the US President.
During the term of Collector Holting,
the Bureau had its first reorganization on January 1, 1913 with
the creation of eight (8) divisions, namely: 1) Accounting, 2)
Cash, 3) Clerical, 4) Inspection, 5) Law, 6) Real Estate, 7) License
and 8) Records. Collections by the Real Estate and License Divisions
were confined to revenue accruing to the City of Manila.
In line with the Filipinization policy
of then US President McKinley, Filipino Collectors were appointed.
The first three (3) BIR Collectors were: Wenceslao Trinidad (1981-1922);
Juan Posadas, Jr. (1922-1934) and Alfredo Yatao (1934-1938).
On May 1921, by virtue of Act No.
299, the Real Estate, License and Cash Divisions were abolished
and their functions were transferred to the City of Manila. As
a result of this transfer, the Bureau was left with five (5) divisions,
namely: 1) Administrative, 2) Law, 3) Accounting, 4) Income Tax
and 5) Inspection. Thereafter, the Bureau established the following:
1) the Examiner's Division, formerly the Income Tax Examiner's
Section which was later merged with the Income Tax Division and
2) the Secret Service Section, which handled the detection and
surveillance activities but was later abolished on January 1,
1951. Except for minor changes and the creation of the Miscellaneous
Tax Division in 1939, the Bureau's organization remained the same
from 1921 to 1941.
In 1937, the Secretary of Finance
promulgated Regulation No. 95, reorganizing the Provincial Inspection
Districts and maintaining in each province an Internal Revenue
Office supervised by a Provincial Agent.
At the outbreak of World War II, under
the Japanese regime (1942-1945), the Bureau was combined with
the Customs Office and was headed by a Director of Customs and
On July 4, 1946, when the Philippines
gained its independence from the United States, the Bureau was
eventually re-established separately. This led to a reorganization
on October 1, 1947, by virtue of Executive Order No. 94, wherein
the following were undertaken: 1) the Accounting Unit and the
Revenue Accounts and Statistical Division were merged into one;
2) all records in the Records Section under the Administrative
Division were consolidated; and 3) all legal work were centralized
in the Law Division.
Revenue Regulations No. V-2 dated
October 23, 1947 divided the country into 31 inspection units,
each of which was under a Provincial Revenue Agent (except in
certain special units which were headed by a City Revenue Agent
or supervisors for distilleries and tobacco factories).
The second major reorganization of
the Bureau took place on January 1, 1951 through the passage of
Executive Order No. 392. Three (3) new departments were created,
namely: 1) Legal, 2) Assessment and 3) Collection. On the latter
part of January of the same year, Memorandum Order No. V-188 created
the Withholding Tax Unit, which was placed under the Income Tax
Division of the Assessment Department. Simultaneously, the implementation
of the withholding tax system was adopted by virtue of Republic
Act (RA) 690. This method of collecting income tax upon receipt
of the income resulted to the collection of approximately 25%
of the total income tax collected during the said period.
The third major reorganization of
the Bureau took effect on March 1, 1954 through Revenue Memorandum
Order (RMO) No. 41. This led to the creation of the following
offices: 1) Specific Tax Division, 2) Litigation Section, 3) Processing
Section and the 4) Office of the City Revenue Examiner. By September
1, 1954, a Training Unit was created through RMO No. V-4-47.
As an initial step towards decentralization,
the Bureau created its first 2 Regional Offices in Cebu and in
Davao on July 20, 1955 per RMO No. V-536. Each Regional Office
was headed by a Regional Director, assisted by Chiefs of five
(5) Branches, namely: 1) Tax Audit, 2) Collection, 3) Investigation,
4) Legal and 5) Administrative. The creation of the Regional Offices
marked the division of the Philippine islands into three (3) revenue
The Bureau's organizational set-up
expanded beginning 1956 in line with the regionalization scheme
of the government. Consequently, the Bureau's Regional Offices
increased to (8) eight and later into ten (10) in 1957. The Accounting
Machine Branch was also created in each Regional Office.
In January 1957, the position title
of the head of the Bureau was changed from Collector to Commissioner.
The last Collector and the first Commissioner of the BIR was Jose
A significant step undertaken by
the Bureau in 1958 was the establishment of the Tax Census Division
and the corresponding Tax Census Unit for each Regional Office.
This was done to consolidate all statements of assets, incomes
and liabilities of all individual and resident corporations in
the Philippines into a National Tax Census.
To strictly enforce the payment of
taxes and to further discourage tax evasion, RA No. 233 or the
Rewards Law was passed on June 19, 1959 whereby informers were
rewarded the 25% equivalent of the revenue collected from the
In 1964, the Philippines was re-divided
anew into 15 regions and 72 inspection districts. The Tobacco
Inspection Board and Accountable Forms Committee were also created
directly under the Office of the Commissioner.
The appointment of Misael Vera as Commissioner
in 1965 led the Bureau to a "new direction" in tax administration.
The most notable programs implemented were the "Blue Master Program"
and the "Voluntary Tax Compliance Program". The first program
was adopted to curb the abuses of both the taxpayers and BIR personnel,
while the second program was designed to encourage professionals
in the private and government sectors to report their true income
and to pay the correct amount of taxes.
It was also during Commissioner Vera's
administration that the country was further subdivided into 20
Regional Offices and 90 Revenue District Offices, in addition
to the creation of various offices which included the Internal
Audit Department (replacing the Inspection Department), Administrative
Service Department, International Tax Affairs Staff and Specific
Providing each taxpayer with a permanent
Tax Account Number (TAN) in 1970 not only facilitated the identification
of taxpayers but also resulted to faster verification of tax records.
Similarly, the payment of taxes through banks (per Executive Order
No. 206), as well as the implementation of the package audit investigation
by industry are considered to be important measures which contributed
significantly to the improved collection performance of the Bureau.
The proclamation of Martial Law on
September 21, 1972 marked the advent of the New Society and ushered
in a new approach in the developmental efforts of the government.
Several tax amnesty decrees issued by the President were promulgated
to enable erring taxpayers to start anew. Organization-wise, the
Bureau had also undergone several changes during the Martial Law
In 1976, under Commissioner Efren
Plana's administration, the Bureau's National Office transferred
from the Finance Building in Manila to its own 12-storey building
in Quezon City, which was inaugurated on June 3, 1977. It was
also in the same year that President Marcos promulgated the National
Internal Revenue Code of 1977, which updated the 1934 Tax Code.
On August 1, 1980, the Bureau was
further reorganized under the administration of Commissioner Ruben
Ancheta. New offices were created and some organizational units
were relocated for the purpose of making the Bureau more responsive
to the needs of the taxpaying public.
After the People's Revolution in February
1986, a renewed thrust towards an effective tax administration
was pursued by the Bureau. "Operation: Walang Lagay" was launched
to promote the efficient and honest collection of taxes.
On January 30, 1987, the Bureau was
reorganized under the administration of Commissioner Bienvenido
Tan, Jr. pursuant to Executive Order (EO) No. 127. Under the said
EO, two (2) major functional groups headed and supervised by a
Deputy Commissioner were created, and these were: 1) the Assessment
and Collection Group; and 2) the Legal and Internal Administration
With the advent of the value-added
tax (VAT) in 1988, a massive campaign program aimed to promote
and encourage compliance with the requirements of the VAT was
launched. The adoption of the VAT system was one of the structural
reforms provided for in the 1986 Tax Reform Program, which was
designed to simplify tax administration and make the tax system
more equitable. It was also in 1988 that the Revenue Information
Systems Services Inc. (RISSI) was abolished and transferred back
to the BIR by virtue of a Memorandum Order from the Office of
the President dated May 24, 1988. This transfer had implications
on the delivery of the computerization requirements of the Bureau
in relation to its functions of tax assessment and collection.
The entry of Commissioner Jose Ong
in 1989 saw the advent of the "Tax Administration Program" which
is the embodiment of the Bureau's mission to improve tax collection
and simplify tax administration. The Program contained several
tax reform and enhancement measures, which included the use of
the Taxpayer Identification Number (TIN) and the adoption of the
New Payment Control System and Simplified Net Income Taxation
The year 1993 marked the entry into the
Bureau of its first lady Commissioner, Liwayway Vinzons-Chato.
In order to attain the Bureau's vision of transformation, a comprehensive
and integrated program known as the ACTS or Action-Centered Transformation
Program was undertaken to realign and direct the entire organization
towards the fulfillment of its vision and mission.
It was during Commissioner Chato's
term that a five-year Tax Computerization Project (TCP) was undertaken
in 1994. This involved the establishment of a modern and computerized
Integrated Tax System and Internal Administration System.
Further streamlining of the BIR was
approved on July 1997 through the passage of EO No.430, in order
to support the implementation of the computerized Integrated Tax
System. Highlights of the said EO included the: 1) creation of
a fourth Revenue Group in the BIR, which is the Legal and Enforcement
Group (headed by a Deputy Commissioner); and 2) creation of the
Internal Affairs Service, Taxpayers Assistance Service, Information
Planning and Quality Service and the Revenue Data Centers.
With the advent of President Estrada's
administration, a Deputy Commissioner of the BIR, Beethoven Rualo,
was appointed as Commissioner of Internal Revenue. Under his leadership,
priority reform measures were undertaken to enhance voluntary
compliance and improve the Bureau's productivity. One of the most
significant reform measures was the implementation of the Economic
Recovery Assistance Payment (ERAP) Program, which granted immunity
from audit and investigation to taxpayers who have paid 20% more
than the tax paid in 1997 for income tax, VAT and/or percentage
In order to encourage and educate
consumers/taxpayers to demand sales invoices and receipts, the
raffle promo "Humingi ng Resibo, Manalo ng Libo-Libo" was institutionalized.
The Large Taxpayers Monitoring System was also established under
Commissioner Rualo's administration to closely monitor the tax
compliance of the country's large taxpayers.
The coming of the new millennium
ushered in the changing of the guard in the BIR with the appointment
of Dakila Fonacier as the new Commissioner of Internal Revenue.
Under his administration, measures that would enhance taxpayer
compliance and deter tax violations were prioritized. The most
significant of these measures include: full utilization of tax
computerization in the Bureau's operations; expansion of the use
of electronic Documentary Stamp Tax metering machine and establishment
of tie-up with the national government agencies and local government
units for the prompt remittance of withholding taxes; and implementation
of Compromise Settlement Program for taxpayers with outstanding
accounts receivable and disputed assessments with the BIR.
Memoranda of Agreement were also forged
with the league of local government units and several private
sector and professional organizations (i.e. MAP, TMAP, PCCI, FFCCCI,
etc.) to help the BIR implement tax campaign initiatives.
In September 1, 2000, the Large Taxpayers Service
(LTS) and the Excise Taxpayers Service (ETS) were established
under EO No. 175 to reinforce the tax administration and enforcement
capabilities of the BIR. Shortly after the establishment of said
revenue services, a new organizational structure was approved
on October 31, 2001 under EO No. 306 which resulted in the integration
of the functions of the ETS and the LTS.
In line with the passage of the Electronic Commerce
Act of 2000 on June 14, the Bureau implemented a Full Integrated
Tax System (ITS) Rollout Acceleration Program to facilitate the
full utilization of tax computerization in the Bureau's operations.
Under the Program, seven (7) ITS back-end systems were released
in stages in RR 8 - Makati City and the Large Taxpayers Service.
Following the momentous events of EDSA II in
January 2001, newly-installed President Gloria Macapagal-Arroyo
appointed a former Deputy Commissioner, Atty. René G. Bañez,
as the new Commissioner of Internal Revenue.
Under Commissioner Bañez's administration,
the BIR is currently undergoing a process of transformation to
make the agency taxpayer-focused. This is being undertaken through
implementation of change initiatives that are directed to: 1)
reform the tax system to make it simpler and suit the Philippine
culture; 2) reengineer the tax processes to make them simpler,
more efficient and transparent; 3) restructure the BIR to give
it financial and administrative flexibility; and 4) redesign the
human resource policies, systems and procedures to transform the
workforce to be more responsive to taxpayers' needs.
Measures to enhance the Bureau's revenue-generating
capability are also being implemented. Foremost of these measures
are the implementation of the Voluntary Assessment Program and
Compromise Settlement Program and expansion of coverage/scope
of the creditable withholding tax system. A technology-based system
that promotes the paperless filing of tax returns and payment
of taxes was also adopted through the Electronic Filing and Payment
With the resignation of Commissioner
Bañez on August 19, 2002, Finance Undersecretary Cornelio
C. Gison was designated as interim BIR Commissioner. Eight days
later (on August 27, 2002), former Customs Commissioner, Guillermo
L. Parayno, Jr. was appointed as the new Commissioner of Internal
Barely a month since his
assumption to duty as the new CIR, Commissioner Parayno offered
a Voluntary Assessment and Abatement Program (VAAP) to taxpayers
with under-declared sales/receipts/income.
To enhance the collection
performance of the Bureau, three basic strategies were initially
adopted, and these are: 1) intensify the use of new systems (e.g.
the Reconciliation of Listings for Enforcement or RELIEF System);
2) enhance the security of tax payments through the use of electronic
broadcasting system and full implementation of eFPS; and 3) tap
non-traditional sources of revenues for additional collection.
Toward these ends, the Bureau has been implementing several work
programs which are directed towards: 1) more effective taxpayer
compliance control systems; 2) effective detection and elimination
of revenue leakages; 3) intensified enforcement of tax laws; 4)
implementation of BIR-private sector good and honest governance
programs; 5) organizational adjustments; 6) active support to
legislative revenue measures; and 7) deployment of productivity
and effectiveness enhancement technology.
Some of the most significant
initiatives undertaken under CIR Parayno's administration are:
1) expansion of VAT coverage to include professionals; 2) rollout
of various e-services, which include Electronic Broadcasting,
Web-based TIN application and processing and Electronic Raffle
of invoices/receipts; 3) building of third party information through
computer linkages and data matching; 4) enhancement of existing
detection systems, which include conduct of Tax Compliance Verification
Drives; 5) audit of exempt entities and cases involving non-remittance
of withholding taxes; 6) conduct of special operations on high
profile tax evaders; 7) establishment of linkage with private
sector groups for joint monitoring and implementation of good
governance projects; and 8) establishment of the BIR Contact Center.
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