Bureau of Internal Revenue
Republic of the Philippines

• Preparations for BIR’s Centennial in August 2004 to Start Now
  
• BIR at 99: Strengthening Tax Administration for a Strong Republic
• Transforming the Bureau of Internal Revenue
• BIR: Working Towards Progress in the New Millenium
• Attaining Global Competitiveness
• Major Accomplishments of the BIR
• E-Commerce and Tax Administration
• The (Near) Future of Cybertaxation in the Philippines
• E-Commerce: Its Implications on Tax Treaties
• Development in the BIR Tax Information and Education Campaign
• The Philippine Tax Collection System: Its Evolution and Direction
• Tax Incentives: Necessity and Approaches
• The Y2K Enigma
• BIR Organizational Restructuring

BIR at 99:
STRENGTHENING TAX ADMINISTRATION
FOR A STRONG REPUBLIC

By ROWENA G. ALTURA
Chief, BIR Corporate Communications Division

HARNESSING INFORMATION AND COMMUNICATIONS TECHNOLOGY IN BIR OPERATIONS

For the past 99 years that the BIR had rendered service to the taxpaying public, it had instituted reforms in various forms to improve revenue collections and administration.

With the onset of the Tax Computerization Project in 1994, BIR had continuously used Information and Communications Technology to strengthen tax administration, in support of President Arroyo’s vision of a strong republic.

 After investing over P 2.0 Billion on computer hardware and software (including non-computer equipment), and with over 7,000 BIR personnel trained and equipped with the required knowledge to work in a computerized environment, BIR can now be considered as the leading government agency that uses Information and Communications Technology to the fullest in its operations and administration. Today, with the use of ICT, BIR strives to achieve transparency in its operations as well as empower the revenue personnel in the performance of their functions.

The most recent applications of Information and Communications Technology in BIR operations and administration are the following:

Electronic Submission (eSubmission)

Electronic Submission (eSubmission) is the electronic transmission to the BIR of the required tax returns, forms, lists, etc. through the BIR Website (www.bir.gov.ph). It was conceptualized and implemented to make tax compliance easier and more convenient on the part of taxpayers. The components of eSubmission are eFPS, eRELIEF, eAlphalist, and ePayee, the details of which are presented hereunder.

Electronic Filing and Payment System (eFPS)

Under the Electronic Filing and Payment System or eFPS, identified corporate taxpayers (initially the Large Taxpayers and volunteering non-Large Taxpayers) can file their tax returns and pay their taxes electronically through the BIR Website. Through eFPS, automatic confirmation (to taxpayers) of receipt of tax payment is made by both the BIR and eFPS Accredited Agent Banks (AABs).

To date, banks authorized to receive tax payments under the eFPS include the following: Philippine National Bank, Land Bank of the Philippines, Development Bank of the Philippines, Bank of the Philippine Islands, Union Bank, Security Bank, Equitable PCIB, Metrobank, Banco de Oro and Standard Chartered Bank (using the Payment Gateway of BANCNET).

eFPS Full Outsourcing

Because of the need to expand the eFPS capabilities and coverage for its continuous service to the taxpaying public, the BIR formally kicked off the full outsourcing of the eFPS to the AyalaPort last May 6.

The project involves the full outsourcing of the development, maintenance, operations and management of the eFPS to the AyalaPort. Through full outsourcing, coverage of the eFPS will be expanded to include not only the existing 1,700 selected Large and volunteering non-Large Taxpayers but also the top 1,000 taxpayers of the 40 computerized District Offices and 200 non-Large Taxpayers.

Additional BIR Forms will also be made available on-line and new features will be incorporated to make use of the eFPS easier and more efficient on the part of both taxpayers and the BIR.

The report generation capabilities of the eFPS will likewise be enhanced by integrating its data with the Integrated Tax System (ITS). This will improve the Bureau’s capability to monitor tax compliance.

By middle of October this year, the new eFPS is targeted to be hosted in full-outsourced mode in the AyalaPort.

eFPS Enhancements

Because of the convenience provided to taxpayers by the eFPS, enhancements to the eFPS are being undertaken to include in its features the payment of taxes through the use of Automated Teller Machines (ATM). This feature of the eFPS will be made available to professionals and individual taxpayers by November 2003. Tax payments via ATM will also be made available even for those who will file their tax returns manually.

eRELIEF

RELIEF stands for Reconciliation of Listings for Enforcement.  Under eRELIEF, corporate taxpayers transmit electronically to BIR through the BIR Website its quarterly sales and purchases schedule.  Through these data, BIR can determine the corporations’ VAT payments (for its purchases) and VAT receipts (for its sales), and how much VAT these corporations should pay to the BIR. Through RELIEF, the BIR is able to estimate with a high level of confidence the amount of sales and VAT liabilities of corporations.

At present, RELIEF is being implemented among the 1,500 Large Taxpayers whose tax payments to BIR account for about 60% of total BIR collections. Eventually, all business establishments with annual sales of at least P 2.5 Million and annual purchases of at least P 1.0 million will be covered by the RELIEF system.

eAlphalist

Under eAlphalist, corporations submit electronically through the BIR Website the list of its employees earning purely compensation income, with the corresponding amount of tax withheld for each employee indicated.

Employees covered by the BIR’s eAlphalist are no longer required to file their annual Income Tax Returns.  Should the employee need a proof of his income tax payments, the employer, empowered by the BIR, can issue the needed certification for the purpose. This is the reason why eAlphalist is also called eSubstituted filing because the eAlphalist submitted by the employer takes the place of the Income Tax Return filed annually with the BIR by employees earning purely compensation income.

Several corporations operating in PEZA in Cavite and Laguna, comprised of around 50,000 employees, are now implementing eAlphalist.

ePayee

ePayee covers taxpayers who are not earning purely compensation income. Through ePayee, corporations can send electronically to BIR the Annual Information Return of Income Tax Withheld at Source for payees who have income other than compensation income, such as consultant’s fee, retainer’s fee, rentals, contractor fees and other professional fees.

The partners of the BIR in the implementation of eSubmission (especially eAlphalist and ePayee) are the Semi-Conductors and Electronics Industries of the Philippines, Inc. (SEIPI) and E-KONEK, an IT company.

eTIN System

Registering with the BIR is now made easier through the implementation of the “TIN on the Web” project (also known as the eTIN system) starting last March 24, 2003. Through the eTIN sytem, taxpayers classified as professionals will have the convenience of getting their Taxpayer Identification Number (TIN) merely by visiting the BIR Website at www.bir.gov.ph. The eTIN system is currently limited to TIN inquiry (for taxpayers with existing TIN) and issuance of TIN for new registrants classified as professionals. Other taxpayer groups will soon be covered under Phase 2 of the project. Implementation of the project was done in partnership with Oracle and Sun Microsystems Philippines, Inc.

eBroadcasting

To secure the BIR payment system and address the problem of diversion of tax payments to the personal accounts of criminal elements, the BIR launched the Electronic Broadcasting System (eBroadcasting) on November 15, 2002. Through eBroadcasting, taxpayers are notified automatically via electronic media (SMS, e-mail, BIR Website) regarding all tax payments made by them to Authorized Agent Banks (AABs) within 48 hours from receipt of said payments. The implementation of eBroadcasting was made possible through BIR’s partnership with the Banker’s Association of the Philippines, Smart, Oracle Philippines, Sun Microsystems Philippines and e-Science Corporation.

BIR SPECIAL PROJECTS IN PARTNERSHIP WITH

THE PRIVATE SECTOR

To promote good and honest governance, Commissioner Guillermo L. Parayno Jr. encouraged private sector participation in BIR initiatives to improve revenue collections. Toward this end, he created the BIR-Private Sector Joint Project Monitoring and Implementing Unit in January 2003 to foster the joint involvement of concerned and interested private sector groups in various Good and Honest Governance Programs of the BIR. Since then, several projects had been undertaken with the private sector, the details of which are discussed hereunder.

Imposition of Advance Tax on Privilege Stores

Sometime in January this year, the problem of collecting taxes from “tiangges” (or “privilege stores”) was brought to the attention of the Bureau by the officers of the Philippine Retailers Association (PRA). After several meetings with the PRA officers, BIR came out with a Revenue Regulations (RR) No. 16-2003 last April 29 to impose the advance payment of business tax and income tax on operators of  “privilege stores” or  “tiangges”, as well as to prescribe the tax obligations of organizers or exhibitors of space for the operation of “tiangges”.

Under said Regulations, a fixed amount of Value-Added Tax or Percentage Tax, as the case may be, of P 150 per day (or P 4,500 per month) and Income Tax of P 50 per day (or P 1,500 per month) are be imposed and collected in advance on a monthly basis from “tiangge” operators for the entire duration of their business operation. The advance payments are credited against the actual business tax and income tax due from such persons for the taxable period for which such payments were remitted to the BIR.

In response to the various comments received by the BIR from “tiangge” operators after the issuance of RR No. 16-2003, a revised revenue issuance is being prepared to address their concerns.

Strengthening of the Withholding Tax System and the

Bureau’s Internal and External Audit System

The Huwag TAXsil Group (HTG), a non-government organization composed of business experts and professionals associated with the University of Asia and the Pacific, is closely coordinating with specific BIR offices (Collection, Assessment and Inspection Services) in the formulation of measures that will improve tax administration. Priority areas that HTG is focusing on are the withholding tax system and the Bureau’s external and internal audit system.

Year-Round Tax Campaign

BIR launched its year-round nationwide tax campaign for 2003 last February 24 with the theme “BUWIS KO, ALAY KO”.  Several private groups supported the tax campaign, which include Globe and Smart Telecommunications, McDonalds, San Miguel Corporation, Air 21, Lina Group of Companies and the Federation of Filipino-Chinese Chamber of Commerce and Industry, Inc. These groups supported the campaign by sponsoring advertisements through multi-media systems (print, media, billboard, tarpaulin streamers) and contributing tax campaign materials. Various television networks (ABS-CBN 2, GMA 7, PTV 4, ABC 5, RPN 9 and IBC 13) likewise provided free airtime for the showing of BIR informercials.

To manifest their support for the Bureau’s campaign for the early filing of tax returns, members of the Bangon Filipino Movement Philippine Chamber of Commerce and Industry (PCCI), Trade Union Congress of the Philippines (TUCP), Filipino-Chinese Chamber of Commerce and Industry (FCCI), Philippine Retailers Association (PRA), El Shaddai, Federation of Philippine Industries (FPI) and Employees Confederation of the Philippines (ECOP) and the Undersecretaries Association of the Philippines “symbolically” filed their returns on March 10 and 31, respectively, way ahead of the April 15 deadline.

BIR on Wheels

To encourage taxpayers’ voluntary compliance, the “BIR on Wheels” has been conceptualized and mobilized nationwide to bring revenue services closer to the taxpaying public. The “BIR on Wheels” is a one-stop shop that handles the issuance of Taxpayer Identification Number (TIN) for new registrants, acceptance of registration payments and issuance of Certificate of Registration, updating of BIR registration information and giving of response to taxpayer queries, which includes TIN verification. The project had its first stop at the ABS-CBN last February 26 to encourage professionals from the entertainment industry to register as VAT taxpayers. UnionBank provided support to the BIR in this endeavor.

VAT Riders Team

A cycling team, called the BIR VAT Riders, joined the Tour Pilipinas 2003 caravan for the first time to promote tax consciousness and voluntary tax compliance, particularly in relation to the Value-Added Tax (VAT). The caravan, which is a fifteen stage 2,456 kilometer cycling marathon covering all Luzon provinces, started in Legaspi City, Albay last April 26 and ended on May 11, 2003 at the Quirino Grandstand in Luneta. The Lina Group of Companies sponsored the BIR’s participation in the Tour Pilipinas 2003 marathon through the VAT Riders.

BIR Text Raffle Promo

To encourage consumers to habitually ask for receipts every time they make purchases (whether goods or services), the BIR launched the “Bayan, I-txt ang Resibo” raffle promo last June 2. This year’s lottery is being conducted electronically via the short messaging system (SMS) or texting and use of random selection software for the determination of winners. The Bureau’s partners in this initiative are: Globe and Smart Telecommunications; Red Ribbon, Star Bucks Café, Enchanted Kingdom and Jollibee Food Corporation for the daily consolation prizes; and ShoeMart and other commercial establishments for allotting free space for the display of raffle promo posters. Television networks, namely: PTV 4, ABC 5, RPN 9 and IBC 13 provided free air time for the showing of the raffle promo infomercial, while ABS-CBN 2 gave discounted rates for the air time bought.

As of July 29, almost 89,000 subscribers have joined the raffle promo, with total hits numbering to 1.031 Million involving the amount of P 4.447 Billion. The Bureau was also able to receive 6,429 reports and complaints on non-issuance of receipts and invoices by business establishments during the said period.

BIR Contact Center

To make the BIR more responsive to the varying information needs of the taxpaying public, a BIR Contact Center (BIRCC) will be established and launched on August 4. The Contact Center is envisioned to be the first and single point of contact where taxpayers’ queries, complaints and feedback can be consistently and accurately handled.

As part of the soft (internal) launch on August 4, BIR employees in the National Office and Metro Manila district offices will be requested to refer or re-direct phone-in queries concerning Registration of Taxpayers, as well as comments and feedback, to the BIRCC. Inquiries regarding other tax information (i.e. one-time transactions, revenue issuances, BIR programs and projects, etc.) will also be handled by the BIRCC during the succeeding phase of the rollout until September 2003.

The BIRCC project is a joint undertaking of the BIR and the Canadian International Development Agency (CIDA)/Policy Training and Technical Assistance Facility (PTTAF) Executing Agency.

Posting of Zonal Values in Website

To promote transparency in BIR operations, the Fellowship of Christians in Government (FOCIG) agreed to publish in its website the updated zonal value of real properties. FOCIG’s website will be hyperlinked with the BIR website and will serve as an alternative source of the prescribed real property values to be used for internal revenue tax purposes. The FOCIG is a non-government organization with members from around 65 government agencies whose mandate is to help promote good governance.

Preparations for BIR’s Centennial in August 2004 to Start Now*

Our guest of honor and speaker, Executive Secretary Alberto G. Romulo, whom I will properly introduce later.

The Honorable Minister of Veteran’s Affairs and Secretary for Science and Technology of the Canada — Dr. Rey D. Pagtakhan. We all feel good and proud as Filipinos by what you have achieved in Canada and by your presence here this morning.

His Excellency, Ambassador Robert Collette of Canada, who is finishing his tour of duty in the Philippines, we wish you Godspeed.

Secretary Jose Isidro N. Camacho, our hardworking, hands-on and always-there- for-us big boss of the Department of Finance. He is also a very tall boss.

Secretary Emilia T. Boncodin, lady boss of the government agency with the most improved performance as well as one of the best performing government agency per July 2003 MBC Executive Outlook Survey — Congratulations Madame Secretary.  This time, BIR is only second to DBM as most improved, but Madame Secretary, watch out - we are close behind You.

Cong. Herminio G. Teves, Senior Vice Chairman of the Committee of Ways and Means and Most Senior Member of The House Of Representative. The person pointing out what we are not collecting.

Our Former Prime Minister, Former Minister of the Department Finance and now Chairman of BAP, Cesar Aguinaldo Virata.

Other guests, supporters, friends and fans of BIR.

My colleagues, co-workers and co-revenuers in BIR.

Ladies and gentlemen.

There are three things I will be doing.  First, I will give the welcome remarks.  Second, I will present the honorees, and third I will be introducing our guest of honor and speaker.          

Just one more year and BIR will be a hundred years.  Since one year is a very short period to adequately prepare for the Centennial Celebration next year, I propose we start the preparations today.  If you haven’t noticed, the re-painting of the BIR headquarters building — this building, started a month ago and it is now 50% Complete. So our contractor should have no problem completing the work in time for next year’s Anniversary.

Levity aside, we can start our preparations by clearly specifying what we would like our organization to be one year from today.  In defining objectives, we have to give utmost consideration for what our country needs and what they want to see from us.

There will understandably be many definitions of the end State.  There may even be many disagreements on what has already been accomplished as well as on what else needs to be done. But if we want our Centennial Anniversary to become a truly momentous occasion, we have to come to a consensus on these issues now.

For this reason, we have made the exhibition at the National Training Center the focus of today’s 99th Anniversary Celebration.  Dubbed BIR E-Programs in Tax Administration for a Strong Republic, the exhibits showcase some of the accomplishments over the last twelve months in providing effective, good and honest governance and what remains in the pipeline over the next twelve months.

The exhibit will run for one week and the programs will be presented to a wide cross section of the Bureau’s partners and stakeholders. The aim is to generate serious thinking, discussion and agreement on the BIR’s 12-month program leading to the Centennial Celebration in August 2004.

Before we all go to the exhibits and witness the inauguration of the BIR Contact Center, we will listen to the message of our guest of honor and speaker as to what the highest leadership expects from us these coming months and into our 100th year.  But first, may I be allowed to present to him and to all of you those individuals and organizations who helped us get to where we are today.  In the interest of staying within the 2-hour budgeted time for all this morning’s activities, I will no longer be reading the citations of the Award of Recognition.  May I just request the awardees to stand up and be recognized as your names are called.

Private Sector Awardees

1.            Chairman Cesar Virata – Bankers Association Of The Philippines

2.            Chairman Alberto Lina – Linaheim Corporate Services Inc., / E-Konek

3.            Francis Chua And John K. Tan – Federation of Filipino-Chinese Chamber of Commerce and Industry, Inc.

4.            Chairperson Pacecia Pineda – United Print Media Group

5.            President Justo Ortiz – Union Bank of the Philippines

Bureau Officials and Unit Awardees

Taxpayers Account Management Program (TMAP)

A.  Computerized RDOs:

1.      RDO 19, SBMA – Rey Tambis

2.      RDO 32, Quiapo/San Miguel – Benito Wong

3.      RDO 49, North Makati – Roberto Baquiran

4.      RDO 50, South Makati – Perfecto Aranas

5.      RDO116, LTAID I, LTS – HREA Celia King

6.      RDO 122, LTDO Makati – Aida Florencio

7.      RDO 123, LTDO Cebu – Jonathan Capanas

B. Non-Computerized RDOs

1.      RDO 02, Vigan, Ilocos Sur – Imelda Bueno

2.      RDO 58,  Batangas City – Juan Leron

Taxpayer Compliance Verification Drive  (TCVD)

1.      RR 8 Makati – ARD Anselmo Adriano

2.      RR 1 Calasiao, Pangasinan – RD Ruben Buenaventura

3.      RR 9 San Pablo City – ARD Merlinda Ordoyo

4.      RR 5 Valenzuela – ARD Corazon Pangcog

And now, dear guests, friends, co-workers in the Bureau, may I present to you the person who is mainly responsible for my return to government service.  At the height of EDSA, our guest of honor and I had two chance meetings at the EDSA Shrine and in both occasions, he talked to me about returning to government service after the upheaval is all over. I remember asking myself how our guest of honor can be so sure of the outcome of EDSA 2 so early in the day by already scouting around who will join the new government.

The Sunday after the President took her oath of office at the EDSA Shrine, I was one of those honored to have lunch with our guest at his residence.  All but two of those who came were persuaded to join the new government: the NEDA Director General, the Secretary of Budget and Management, the COA Chairman, two Undersecretaries of Finance and the BIR Commissioner, among others.  The Commissioner of Customs was likewise identified in that lunch meeting and our guest himself became the Secretary of Finance.  The two individuals who did not accept the call were nonetheless recruited into the government as “Advisers Assistants” pro bono of our guest.  So, as you can see ladies and gentlemen, our guest speaker is that kind of person who can motivate individuals to turn their backs on good life to be of service to our country.  Why he can easily do these — the reason is that he is such a person himself — ready to give up every thing for the call of service to country.

Ladies and gentlemen, it is my honor and privilege to present to you Executive Secretary Alberto G. Romulo.

* Speech delivered by BIR Commissioner Guillermo L. Parayno, Jr. last August 4, 2003 on the occasion of the Bureau of Internal Revenue’s 99th anniversary celebration.

TRANSFORMING THE BUREAU OF INTERNAL REVENUE*

Introduction

Executive Secretary Romulo, distinguished members of the Cabinet, I am deeply grateful for the opportunity to share with you the Bureau's Transformation Program.

Last night, I was listening to the speech delivered by Prime Minister Tony Blair before the Labor Party Conference. It was indeed a very powerful speech, and I was struck by something that he said, and which I believe is at the heart of the Bureau's Transformation Program, and of our government's general campaign for good governance. Mr. Blair said, "It's not reform that is the enemy of public services. It's the status quo."

Over the years, many efforts have been made to introduce change into the Bureau. Some have been met with a measure of success, but in all of them, resistance to change, and the desire to maintain the "status quo", so to speak, have prevented truly significant improvements in the quality of tax administration. That, however, is about to change.

The desire to maintain "status quos" has, more often than not, resulted in ever decreasing productivity levels, so much so that public services have become more and more ineffective. The waning years of the 20th Century, in fact, saw a steadily declining revenue performance at the Bureau, brought about in equal measures by a flagging global economy and a tax administration system that had become increasingly unresponsive to the needs of the taxpayer, and the government. Such a situation could only result in setbacks for our economic recovery efforts, and the denial of urgently-needed basic services to our people.

If we are to reverse this trend, and attain true economic stability, then the reform of the entire tax administration system is urgent, and inevitable. The "status quo" must go, and go now. This is the guiding spirit behind the BIR Transformation Program, our blueprint for the future of tax administration. Reform is not our enemy - it is our salvation. Change is not our foe - it is our partner.

The BIR Transformation Process

A lot of issues have been raised on how government can, in fact, address the underperformance in revenue generation to provide a lasting solution to the chronic problem of budget deficits.

As the country's primary revenue-generating agency, the Bureau of Internal Revenue collects almost 80 percent of national revenues. However, there has been a decline in performance in the past years that translated to a widening gap between collection and goal, clearly indicating the need for reforms. But before I go into the specifics of the Bureau's transformation process, let me first define the role of the BIR as best articulated by our Mission, that states-

Our mission is to raise revenues for the government through effective and efficient collection of taxes, quality service to taxpayers, and impartial and uniform enforcement of tax laws.

With our mission in mind, what we envision for the new BIR are the following:

· taxpayers satisfied with BIR services
· efficient and effective tax administration
· streamlined and more productive organization
· agency with fiscal and administrative flexibility
· professional, highly skilled, morally upright, motivated and satisfied employees
· improved image of the agency

But the path towards the attainment of our vision is riddled with several obstacles, the most significant of which are the following:

· susceptibility of the BIR to political pressures
· perceived lack of collaboration among government agencies on the prosecution of tax cases
· no continuity in the transformation or business plan
· more complex business transactions due to globalization
· inability to cope with the demands of growing taxpayer population
· public perception that government lacks fiscal discipline
· low tax awareness and negative tax consciousness of Filipinos

In fact, based on the results of a recently-concluded SWS Survey -

· 60% of the respondents says "it is useless to pay more taxes because the money will be wasted or stolen"
· 80% even said that "tax evasion is unfair to those who pay the correct tax"
· within the context of tax administration, "curbing corruption in the collection of taxes is the most important thing to achieve as soon as possible," according to 51% of the respondents

It is because of these obstacles in our business environment that we are proposing an integrated and holistic approach in addressing the limitations of the present tax administration.

Toward this end, we have identified four strategies for transformation. They are…

· reform the Tax System, based on the policies and directions of the DOF
· reengineer the Tax Processes
· restructure the Organization
· recreate the Human Resources

Let us look at these four areas one by one.

On the current tax system, we are faced with the following issues:

· laws and regulations are complicated
· documentary requirements are burdensome
· system is prone to undue exercise of discretion
· susceptible to avoidance and evasion
· not adapted to Philippine setting

Our envisioned tax system for the transformation is -

· simple
· enhances voluntary compliance
· has a broad tax base
· transparent, equitable and efficient
· adapted to contemporary social values and culture

In reforming the tax system, a task force spearheaded by the Department of Finance was formed to evaluate the following tax reform proposals:

· develop systems and procedures to deal with hard-to-tax taxpayers
· shift from net to gross income taxation system
· strengthen the VAT system
· reform taxation of financial institutions
· indexation of tax rates on sin products
· rationalization of fiscal incentives

Issues on the current tax processes are the following:

· red tape and complicated tax processes and forms
· restricted venues for filing and payment due to the limited number of Accredited Agent Banks
· manual audit being practiced is prone to abuse and discretion
· Integrated Tax System needs to be updated to keep pace with current technology

What we envision for the transformation is tax processes that -

· are simple, efficient, transparent and time-bound
· promotes optimal use of new technology
· are customized according to taxpayer classification

To achieve these, we will:

· review criteria used in defining taxpayer type
· undertake research on taxpayer consciousness, behavior and requirements
· review and improve existing core business processes
· review the Integrated Tax System
· outsource identified IT functions

Issues on the present organizational structure of the BIR include:

· difficulty in integrating processes and issues that cut along functional groups
· too many management layers
· uneven allocation of resources at the national, regional and district offices vis-à-vis workload and revenue potential

Our envisioned organizational structure for the transformation is one that:

· is taxpayer or customer-focused
· flat and lean
· has an efficient office network
· complements reengineered processes

We will undertake the following activities to attain the envisioned structure:

· submit a proposed Executive Order, organization chart and statements of functions
· prepare job descriptions and competency profiles
· prepare the manpower plan and staffing pattern
· implement the new organization structure and staffing pattern

Current issues on the Bureau's human resources are the following:

· saddled with a bloated workforce
· very low salaries and limited benefits
· high incidence of graft and corruption
· limited authority to discipline incompetent, erring or recalcitrant personnel
· difficulty in hiring and retaining technically competent personnel

In our envisioned human resource component of the transformation:

· jobs are designed based on processes and customers
· recruitment, selection and hiring of people are based on clear and specific job and competency profiles
· reward and promotion are performance-based
· employees are multi-skilled and empowered to make decisions

Activities that will support this vision include:

· review and improve recruitment and selection policies and procedures
· improve performance management system
· formulate and implement retention and succession plan
· work and obtain funding for Early Retirement Program
· conduct the following training programs:
· Technical Training Courses
· Change Management
· Management & Leadership Development, and
· Customer Service

Support programs for the transformation were also lined up. What we have completed so far are the following:

· established a full time Transformation Management Team
· conducted a Visioning and Strategic Change Planning Seminar
· conducted an SWS survey on taxpayer perception on BIR services and performance
· conducted a Conference on Government Reengineering & Change Management

On-going activities include:

· consultations with multi-sectoral groups
· briefings and consultations with BIR employees
· training for the Transformation Management Team
· conduct of Organizational Effectiveness Study
· benchmarking with international revenue agencies
· conduct of Planning Sessions

Indeed, there is an inherent need for the BIR to have fiscal and administrative flexibility-

· To provide us with adequate operating budget
· To enable us to formulate our own administrative and management policies; and
· To improve our employees' compensation and benefit package

Expected benefits of transformation to the taxpayers are:

· improved delivery of taxpayer service
· minimized compliance cost
· reduced taxpayer burden

The government also stands to gain from the transformation process in the form of increased revenue collections that will result to the following:

· address the problem of budget deficit
· provide bigger budget for the delivery of basic services
· availability of more funds to streamline and reengineer other government agencies

With the expected increase in revenue collections as a result of transformation-

· government will be able to provide attractive work environment and compensation package to its employees
· lead to a more competitive work environment that will enhance employees' productivity
· improve the image of the civil servants

The expected benefits for the BIR employees include:

· improved public image
· adequate operational budget for the agency
· improved work environment
· clear lines of accountability
· empowered frontline workforce
· enhanced level of professionalism
· improved compensation and benefit package

To ensure support and commitment by all stakeholders, we will…

· obtain government support at highest level
· establish working groups and engage stakeholders
· establish internal steering committee and external advisory board, and
· secure technical assistance and funding from foreign donors

Closing

Many have called the Transformation Program ambitious, even grandiose. They forget, however, that it is in the exploration of the far horizons that we are able to step beyond the "status quo" of our lives, and establish new frontiers in civilized society. Change and reform must see beyond the ordinary, if it is to inspire us to better our government, our society, and ourselves.

Some quarters have asked, why the immense interest in transforming the tax administration system, when other aspects of governance also require sweeping reforms and changes? Why should tax administration take such precedence?

I say, why should it not? Without the revenues provided by taxes, there is not one single program of government that can hope to progress from being mere plans on paper to becoming an endeavor that shall truly serve the public. Without the funds generated through taxes, the basic services that are so desperately needed by our people will be no more than items on a thick, heavy volume known as the General Appropriations Bill, words that are no more important than the paper on which they are printed.

Taxes are the linchpin of the economy, the touchstone of our development. If this country is to achieve its goal of a controlled budget deficit, and pull itself completely out of the quagmire of economic recession; if it is to achieve any measure of success in any development program; if it is to give our people a glimmer of hope for a future of stable employment, adequate housing, decent education, competent health care; then the transformation of the tax administration system is imperative, inevitable, and indispensable.

The time to act, the time to reform, the time to change, is NOW. We may have the support of aid agencies, of civil society, of the business group, but it is the support of our fellow public servants that is the most important. We need to know that we are not alone in the battle to uphold good governance. We need to know that our dream of true integrity, greater competence, and unswerving dedication is one that is shared by everyone who calls himself a public servant. We need to know that idealism and integrity still have a place in the halls of public service.

Every day brings with it the opportunity for us to write the future of this government, and of this country, in the lives of the people we serve. And in the pages of our destiny, will the Chapter entitled "Taxation" be one of progress and social justice? Will it tell the story of effective and fair enforcement of the law, economic stability and development, social equality and advancement? The answer, ladies and gentlemen, lies with you. What answer shall it be?

Thank you, and good afternoon.

* Presentation delivered by Commissioner Rene G. Bañez to the members of the Presidential Committee on Effective Governance on October 4, 2001

BIR: Working Towards Progress in the New Millennium*

Honored guests, ladies and gentlemen. Good morning and happy anniversary to the BIR!

I shall now depart from my prepared speech and start with a good news. A few minutes ago, my cellphone rang and you must have seen Cune Gison and myself talking on the phone. That was a call from New York, and the good news is that the IMF just approved the program of the Philippines. That means we have the good housekeeping seal for financial fiscal management. So, I think we have to clap for President Estrada and Secretary Pardo and his economic team. Of course, the significance of that will be detailed by our friends in the media. Among others, aside from the good housekeeping seal of approval of the IMF, it will trigger off inflows of funds. I understand from Undersecretary Bañares, this is $325 Million and a couple of other inflows from the World Bank, ADB, the JBIC, and not to mention, in the words of Congressman Angpin, the confidence of the international financial community, inspite of the BIR not meeting its revenue targets. But if it is any consolation to everyone, in May our slippage was only 4 hours worth of collection. Not very many people know that, but I would like to take this opportunity to thank everyone in the revenue service for that great effort.

As you very well know, the BIR, each working day collects, P 1.515 Billion or almost 80% of total revenues of the government. So that in May, our slippage was only about 4 hours of collection. Kung mas mahaba ng konte sana yung oras, we could have made it. But in June, and this is the bad news, it widened to 4 1/2 days. But I’m sure we will catch up with it and we’re already starting to catch up this July. One piece of good news is that the Large Taxpayers Service, headed by Assistant Commissioner Gina Trinidad met its target in July.

As an entrepreneur and former government official, I’ve had my share of speaking engagements, as you may very well imagine. One year ago, as a matter of fact last Christmas, if someone had told me that I would be delivering an anniversary speech as Commissioner of Internal Revenue, I would have said, " your imagination is working overtime!"

Every Commissioner in his -- or her -- own time has steered the Bureau through eventful eras in our political and economic history. Former Commissioner Justice Efren Plana held the reins of the Bureau through colorful 70’s until he passed on the torch to Commissioner Ruben Ancheta. Of course, Ambassador Benny Tan and Commissioner Jose Ong were witnesses of the transition years of the late 80’s and the early 90’s. My good friend Liway Chato, steered it through relative economic good times of the mid 1990s and proved that woman power is never to be underestimated. And my immediate predecessor, Beth Rualo, became the first career man in more than 30 years to sit in the Commissioner’s office. His term, unfortunately, coincided with the so-called Asian financial crisis.

It would seem that, that is my fate and my privilege to be counted among such well known names. To be entrusted with the honor of carrying on their legacy, and to be privileged to stand with the Bureau at this historic of crossroads in its destiny. No one can deny that the task of tax administration is one that will always be colored with a degree of difficulty. But it is also an endeavor of unique urgency. The success or failure can spell the difference in the ever present battle for economic recovery and development.

Ninety-five years ago, when the Bureau marked its first year of service, its collections amounted to around P4 Million, about as much as it would take to buy a top-of-the-line sports utility vehicle today. Now, the Bureau’s collections are measured in the hundreds of billions, and for the past decade, the Bureau’s annual collections account for, on the average, one tenth of the Gross National Product.

These achievements, though, tell the story of countless efforts and sacrifices on the part of generations of revenuers, who struggle on in oftentimes thankless tasks. Their efforts to soldier on, in the face of the many challenges, is evident in our own performance for the first semester. Although collections for the first six months of the year did not quite meet our revenue target, I believe that we would have fared worse had it not been for the collective efforts of revenuers everywhere.

A preliminary analysis of our June collections showed that the relative slowdown of the economy during the months of April and May had an impact on our collections from a number of industries. Still, I am cautiously optimistic that our revenue goal is attainable, provided that we can, and if I may add a qualifier to our anniversary theme, continue " working together towards progress in the new millennium."

During a presentation held yesterday at the House of Representatives for the Committee on Appropriations, I had the opportunity to share with the committee members a five-point strategic plan to improve our collection performance for the second semester. This include innovations such as an electronic on-line metering machine system to improve our monitoring of DST collections; and a MOA with the LGUs for the collection of withholding tax at the local government level. A similar MOA, with the NGAs, signed with the DBM last March, is already bearing fruit and we are now hitting the rate of P 1.4 Billion a month towards our target of about P 18 to P 20 Billion a year. And of course, the improvement of existing operational programs, such as our audit and investigation activities. By the way, we are going full blast on these, and I have been authorized to make public that there will be no tax amnesty, at least for this year. So, we’re full blast now on tax audits and investigations.

I committed to the Committee on Appropriations yesterday about P12 Billion worth from audit and investigations, and I hope we can make it. It is P12 Billion because there will be no more amnesty this year. And then of course, a lot of discussions are going on in the settlement of delinquent accounts and the implementation of our computerization project.

The success of these efforts, and ultimately the Bureau’s attainment of its collection goal, however, is contingent upon whether we can all work as one in the realization of these programs. I know it has been a difficult first semester, but I commend you all for your efforts in the face of such challenges. If I seem, at times, to be unusually insistent that we meet our targets, it is only because I want the Bureau to succeed in helping the Estrada administration fund its development program, especially its pro-poor programs, while the Bureau enjoys the benefits that it rightfully deserves once it meets its collection goals.

Limited as I and the Deputy Commissioners are to our annual budget, which as you know , is lower this year than the 1999 budget, we cannot, at present, provide you with higher salaries or more modern equipment. But time-honored tradition dictates in times of collection surpluses, a portion of the excess over the annual goal shall be disbursed as bonuses or incentives to all revenuers. This is a tradition that I hope to carry on, with your help.

Nonetheless, and as a matter of a fact, even without waiting for the achievement for our goals this year, we have obtained the approval of Secretary Pardo, Secretary Diokno, and the President Estrada himself, that our budget next year will go up more than 50% from its present budget level of P2.3 Billion up to P3.9 Billion. The bad news is, P500 Million is unprogrammed, contingent on our collections. But with everybody’s help, we will be able to program that amount and I’m almost sure of that.

I know that implementing these programs may not be a cake walk, but I ask you to have faith and trust in our collective efforts. In time, we will all realize the wisdom behind these objectives and overall vision. No one ever said that the road to excellence was an easy one. Nevertheless, it is a road that the Bureau must continue to traverse. That we have all gathered this morning to celebrate ninety-six years of service is proof that each year brings an increasingly greater degree of success in the BIR’s pursuit of more effective tax administration. I fully expect that the BIR’s ninety-seventh year will be no less colorful and challenging.

On this note, I want to commend all of you for all your efforts and cooperation these past seven months, and I encourage you, for the sake of your fellow revenuers and of the Filipino people, to continue giving your very best efforts to our collection and enforcement endeavors.

In concluding my contribution to today’s celebration, I wish to share the thoughts of management expert and author Peter Drucker. " Objectives are not fate; they are direction. They are not commands; they are commitments. They do not determine the future; they are means to mobilize resources and energies… for the making of the future."

The future of the Bureau is ours to make. Let us make it a glorious one. Happy Anniversary and Good Morning!

____________

*Speech delivered by Commissioner Dakila B. Fonacier during the 96^th BIR Anniversary Program held in the BIR National Office on August 1, 2000.

Attaining Global Competitiveness*

I am privileged to deliver the address of Secretary Jose Pardo whom we know is still with the President in the US. Distinguished guests and officers of the BIR, ladies and gentlemen of the revenue service.

The dictates of our national interests have taken me far from you on this very special occasion, and it is indeed one of my great regrets that I cannot be with you to celebrate such an important event in your history as an organization.

Today marks your ninety-sixth year of service to the nation, and the first of your anniversary celebrations in the new millennium. It is truly a memorable event for all of you. Though I am half a world away, I am with you in spirit, and I send you my very warmest greetings. I also take this opportunity to personally extend my warm congratulations and appreciation to all the officials and staff of the Bureau, led by Commissioner Fonacier, for your steadfast support to the fiscal programs of the Department of Finance. I especially commend you for your unwavering commitment to the difficult tasks of revenue generation.

I know I need not emphasize the importance of your role in our economic recovery, indeed, our economic survival. From its fledging beginnings in 1904, the Bureau has evolved into the country’s foremost revenue-generating agency.

In the past ten years, the Bureau has contributed, through its revenue collection efforts, at least one tenth of our entire Gross Domestic Product. I think I would not be remiss in saying that the Bureau’s performance is akin to that of an entire industry. Right now, the Bureau is contributing approximately 80% of the total revenues of the national government.

The Bureau’s significance as an institution will become all the more important as we drive further through the new millennium. International trade will be rendered virtually tariff-free in the year 2010 because of the new economic order, which is globalization. Thus, leaving by that time, the BIR as practically the contributor of all the tax revenues of the government. By that time also, the Bureau will be faced not with just billion budget, but with trillion budget.

The Bureau, as an institution, therefore, must be continuously protected and strengthened. In his state of the nation address, the President reminded us that, and I quote, "The global environment is not changing in small increments. It is changing by quantum leaps. We either keep pace, or we eat the dust of those who forge ahead."

Statistics show, that in terms of exports, the Philippines has not fared as well as its neighbors. As an example, let me cite the fact that in a recent survey of twelve Asian countries, we rank eleventh, just ahead of Vietnam. We do not fare very well either in terms of investments, in contrast to Thailand, Malaysia and Singapore. In short, we still have much to accomplish in keeping our nation apace with global economic development.

It is imperative, therefore, that as we approach the end of the millennium year, we shall have brought our country closer to true global competitiveness.

As I told the participants of our recent Senior Management Training seminar in Tagaytay some weeks ago, becoming globally competitive does not just consist in being able to produce world-class goods and services. It also involves the fostering of an economic climate that it is attractive to foreign investment, whether foreign or domestic. And this is where government shall play a critical role.

The creation of an attractive investment climate calls for the success in four major efforts: the judicious allocation of resources, the creation of strong infrastructure, the continuing enhancement of productivity, and the development of an effective economic strategy that is supported by government policy.

None of these can be achieved, however, if government does not have sufficient resources with which to achieve these objectives. For this reason, the success of our revenue program must be of paramount concern, not only of your Commissioner, not only of the Secretary of Finance, not only of the President, but most importantly, of each and every revenuer.

Time and again, you have heard how crucial the attainment of your revenue goal is to the success of economic development efforts. It is a task that has, through the years, become increasingly difficult, more so, with your agency’s very limited budget situation, your need for better and more modern equipment and working conditions, and your own modest compensation.

No one, with the possible exception of your Commissioner, is more sympathetic to your situation than I am. This is why, together with Commissioner Dakila Fonacier, I am working to provide the Bureau with a more generous budget for the year 2001. While we may not be able to immediately provide you with better salaries, Commissioner Fonacier and I hope to at least improve your working conditions, and the overall resource situation of the Bureau.

I know that government asks much of you. But I trust that despite the many challenges that are inherent in public service, you may still perceive behind the day-to-day routine of your work, the opportunity to change, in your own small way, the course of our nation’s history.

Ninety-six years have transformed the Bureau from a fledgling arm of the Department of Finance, to a sprawling government agency that annually accounts for at least ten to eleven percent of our Gross National Product. None of this could have been possible without the dedicated efforts of generations of revenuers, one of them being my own grandfather.

Every anniversary, the Bureau looks back on its legacy of service, and weighs the accomplishments of the present against the memories of the past. When four years from now, you shall celebrate your centennial and look back on one hundred years of your existence as an organization, may you remember your ninety-sixth year not only as the year the BIR stepped into the 21^st century, but as the year when tax administration took the country beyond a new horizon of progress and peace.

Thank you, Happy Anniversary, and may the God of Wisdom and Mercy guide you through every moment of this new millennium year in your service to our people.

___________

*Speech of Finance Secretary Jose T. Pardo delivered by DOF Undersecretary Cornelio Gison during the 96^th Anniversary Program of the BIR on August 1, 2000

MAJOR ACCOMPLISHMENTS
OF THE BUREAU OF INTERNAL REVENUE
By Rowena G. Altura
Acting Chief
Corporate Communications Division

On the occasion of the BIR’s 96^th anniversary, it is worthwhile to look back and assess what the Bureau has accomplished during the first half of the year 2000. This report recounts the BIR’s collection performance and the measures it has undertaken to enhance revenue generation and improve tax administration, in pursuit of the priority actions laid down by Commissioner Dakila B. Fonacier at the start of his administration.

I. BIR COLLECTION PERFORMANCE

For the first semester of CY 2000, the BIR was able to collect P 181.93 Billion, representing approximately 80% of the country’s total government tax revenues for the period. Said collections exceeded by 3.40% or P 5.67 Billion, the previous year’s collections for the same period.

Compared to the Bureau’s P 188.64 Billion revenue target from January to June, the BIR missed its target by 3.56% or by P 6.71 Billion. However, based on the computed P 1.52 Billion average daily collection of the BIR during the six-month period, said shortfall represents only 4 ½ days slippage in collection.

Considering that the Bureau’s goal of P 397.764 Billion for CY 2000 is anchored upon the assumption that the country’s Gross Domestic Product (GDP) will grow at 4% and the inflation rate would be at 5.5%, a look at the actual collection performance of the BIR during the first quarter would show that the Bureau overperformed during the period.

Since actual GDP registered only at 3.4%, the BIR should have collected only P 76.708 Billion during the first quarter. With an actual collection of P 82.105 Billion, the BIR overperformed by P 5.397 Billion or 7.04% during the first quarter vis-à-vis the actual GDP growth.

During the same period, the BIR’s tax effort registered at 11.81%, exceeded the targeted tax effort of 10.57%.

II. MEASURES UNDERTAKEN TO ENHANCE REVENUE GENERATION

The relatively good collection performance of the BIR is the result of implementation of measures geared towards enhancing revenue generation and improving tax administration. These measures are discussed in detail below.

1. Organizational Restructuring of the BIR

The organizational restructuring of the BIR was mandated by President Joseph Estrada through Executive Order No. 175 signed in November 1999. As a result of the restructuring, the BIR was able to improve its administrative control over the large taxpayers and the excise taxpayers. This was made possible through the creation of two (2) new services in the BIR National Office: the Large Taxpayers Service (LTS) and the Excise Taxpayers Service (ETS).

Under the new structure, these two implementing groups account for more than 54% of the revenue goal for CY 2000. The LTS now renders full service to 633 identified large taxpayers, while the ETS accounts for the top 100 excise taxpayers.

As part of the organizational restructuring, a Large Taxpayers Division will also be established in RR 8 – Makati City by September 2000.

 

2. Full Utilization of Tax Computerization

The full utilization of existing tax computerization capabilities to improve tax compliance and operational efficiency is one of the Bureau’s priorities under the administration of Commissioner Dakila Fonacier.

Much has been accomplished since the inception of the BIR Tax Computerization Project (TCP) in 1994, such as:

• Development of 14 applications of the Integrated Tax System (ITS)
• Establishment of five (5) Revenue Data Centers and the National Command Center
• Implementation of the Limited Bank Data Entry (LBDE) system to 2,524 re-accredited Authorized Agent Banks servicing all 115 RDOs
• Implementation of the ITS in all Metro Manila and Metro Cebu Revenue District Offices (RDOs)
• Establishment of the National Training Center and Cebu Training Center and training of 6,477 BIR personnel in technical and ITS business courses
• Set up of taxpayer service support infrastructure (i.e. Information Kiosks, BIR Web page)
• Implementation of RDO-based return processing in 32 RDOs
• Establishment of linkages with major institutions (i.e. LTO, LRA, IC, BOC) that facilitate the exchange of information over a network

In order to build on the initial successes brought about by the TCP, the BIR will expand its coverage by undertaking the following:

• Full implementation of existing Tax Computerization Project (TCP) capabilities, especially in sites with high collection impact, namely: LTS, ETS, Makati Region and other Metro Manila/Cebu RDOs
• Implementation of the TCP systems in key cities/municipalities outside Metro Manila, such as Davao, Baguio, Cagayan de Oro, Bacolod and Iloilo
• Expansion of the coverage of third party information linkages with other government agencies and other industry groups/institutions
• Development of an automated data capture system for taxpayer data using modern technology (i.e. electronic filing, electronic data transfer)

For the first semester of 2000, the TCP had accomplished the following:

• Conduct of preparatory activities for the implementation of ITS/core systems rollout in RR 4-Pampanga, RR 5-Valenzuela, RR 6-Manila, RR 7-Quezon City, RR 8-Makati, RR 9-San Pablo and RR 13-Cebu City
• Conduct of preparatory activities for the acceleration of full ITS rollout in the LTS, ETS and Large Taxpayers Division in RR 8-Makati
• Conduct of contract negotiation for the Internet connection of non-computerized BIR offices
• Enhancement of technical infrastructure for the implementation of the web-based TIN verification
• Establishment of linkages with the Bureau of Customs, Securities and Exchange Commission and the Manila City Government
• Conduct of preparatory activities for the automation of data capture

3. Enhancement of Taxpayer Compliance

Intensification of Taxpayer Information and Education

The Bureau’s good collection performance is also a manifestation of enhanced taxpayer compliance. This may be attributed, to a large extent, to the intensification of the tax information and education campaign, which was done in coordination with the private sector.

Specifically, the following initiatives were undertaken by the BIR to help the taxpayers comply with their tax obligations:

• Establishment of Tax Tulungan Centers in selected commercial shopping centers nationwide, in coordination with the Philippine Institute of Certified Public Accountants (PICPA) and the Philippine Retailers Association
• Entering into Memoranda of Agreement with seven (7) groups to help the BIR intensify its conduct of tax campaigns. These groups are: Tax Management Association of the Philippines (TMAP), Federation of Filipino-Chinese Chamber of Commerce and Industry, Management Association of the Philippines, Philippine Chamber of Commerce and Industry, Financial Executives Institute of the Philippines, Science Park of the Philippines, Inc. and the Union of Local Authorities of the Philippines
• Development and distribution of primers and other tax information materials, such as "Guide to Error-Free Tax Filing" and "Rules and Procedures in Registering a Business

• Development and update of the BIR Webpage, which contains tax advisory/ information materials and has the capability to download BIR forms

• Conduct of nationwide BIR raffle promo which instilled in the public’s consciousness the value of asking for receipts
• Conduct of tax seminars/briefings and regular tax campaigns
• Extensive use of tri-media resources to disseminate tax information

Issuance of Revenue Regulations to Implement the CTRP

The issuance and dissemination of Revenue Regulations to implement the amendments introduced by the Comprehensive Tax Reform Program (CTRP) contributed to the enhancement of taxpayer compliance. To date, the Bureau had issued thirty-one (31) Revenue Regulations and seventeen (17) Revenue Memorandum Circulars to implement the CTRP, as well as give clarifications on its provisions.

The BIR is also collaborating with a number of private sector organizations, such as PICPA, the TMAP and the Legal Management Association of the Philippines, in the formulation of Revenue Regulations to implement the following provisions of the CTRP:

1. Improperly Accumulated Earnings Tax
2. Net Operating Loss Carry-Over
3. Minimum Corporate Income Tax
4. De Minimis Benefits and ACA
5. Deductibility of Interest Expense
6. Estate and Donors Taxes
7. Tax Credit Certificates
8. Tax Exemptions on Sale of Principal Residence
9. Gross Philippine Billings
10. Issuance of Sales Invoices and Receipts

3. Deterrence of Tax Violations

Enhancement of Assessment System

Measures geared towards the enhancement of the Bureau’s assessment system likewise proved instrumental to the deterrence of tax violations. These measures are:

• Strengthening of the BIR-LRA Project through expansion of its coverage and prosecution of violations relative to the issuance of fake Tax Clearance Certificates and Certificates Authorizing Registration
• Adoption of policy on specific/short audit to introduce a broad range of audit checking activities and improve the targeting of audit activities to major areas of risk
• Build up of third party information (TPI) capability to broaden the taxpayer base
• Review and evaluation of taxpayer’s availment of tax exemptions and incentives
• Update of zonal valuations
• Audit/investigation of business establishments found to have issued fake or spurious sales invoices or receipts
• Conduct of tax mapping activities

Enhancement of Collection System

The increase in collection of the BIR is also the result of implementation of measures designed to enhance the Bureau’s capacity to collect the correct amount of taxes, as well as monitor the remittance of taxes collected. These measures are:

• Ensuring the withholding and remittance of taxes through collaboration with the DOF, DBM and COA, in the preparation and issuance of Joint Resolution No. 1-2000, which contains the implementing guidelines in the remittance of all taxes withheld by national government agencies to the BIR.

• Systematic matching of income reports received from payers under the creditable withholding arrangements
• Expansion of the use of electronic on-line DST metering machine to include all banks, insurance companies, Register of Deeds and shipping companies
• Strict implementation of the Stop-Filer/Non-Filer Detection Program

3. Improvement in Operational Efficiency

Compared to the Bureau’s annual collection target, which increases by almost 12% every year (on the average), the BIR’s cost-to-collect has been declining from P 0.93 in 1996 to P 0.77 in 1999. For the year 2000, the Bureau’s budget was even slashed down to only P 2.4 Billion, which means that the BIR is expected to spend only P 0.60 for every P 100 it collects.

Given this very limited operating budget, the Bureau is undertaking measures to improve its operational efficiency. These measures are:

• Working for the outsourcing of IT and legal services
• Implementation of image-building program, to include change management and professionalization programs
• Implementation of the Human Resource Information System and the Financial Management Information System

In addition to the foregoing initiatives, the following proposed regulations are being drafted to further improve tax administration:

Moreover, improvements in the Bureau’s collection efficiency will be further sustained through the passage into law of several bills, namely:

1. Creation of Criminal Tax Court

This proposes the conversion of the Court of Tax Appeal into a specialized tax court with exclusive criminal jurisdiction. Once approved, this will be instrumental in the expeditious and judicious settlement of tax cases appealed in court since this will give the Criminal Tax Court exclusive and original jurisdiction over all crimes arising from violations of the National Internal Revenue Code (NIRC).

2. Lateral Attrition Bill

This Bill will optimize the potential of the BIR as the premier revenue-generating agency of the country through the institution of the grant of incentives to revenue officers who will meet their collection targets, as well as the imposition of well-defined sanctions and attrition to those who will unjustifiably fail to collect their assigned goal.

3. Financial Institution Tax

The current gross receipt tax system imposed on banks and financial institutions does not satisfy the basic concept of feasibility in tax administration and sufficiency of tax collection from this sector. The Bureau proposes a simplified concept which will promote voluntary tax compliance and avoid the difficulty of discovering tax avoidance or evasion.

4. VAT on Brokers and Professionals

With already 46% of the Bureau’s revenue target attained during the first semester of the year, the challenge now is how to raise the remaining P 215.83 Billion collection goal for the next six months.

Commissioner Fonacier identified several measures the Bureau would focus on in order to attain this year’s revenue budge. These measures are: expansion of the use of electronic DST metering machine; intensification of collection of delinquent accounts and/or disputed assessments; conduct of full-blast tax audit and investigation; establishment of tie-up with the LGUs for the prompt remittance of their withholding taxes and full utilization of tax computerization in the Bureau’s operations.

For as long as the BIR can look to the government and private sectors for support in its tax awareness and revenue-generating efforts, the goal of attaining the P 397 Billion revenue target for the year 2000 will not be far from becoming a reality.

E-COMMERCE AND TAX ADMINISTRATION*

  With the recent promulgation into law of Republic Act No. 8792, or the E-Commerce Law, which provides for the legal recognition and use of electronic commercial and non-commercial transactions, it now becomes imperative for the BIR to introduce this concept into its existing tax administration system.

 Section 27 of the Act directs all government offices to recognize electronic transactions and to transact government business and/or perform governmental functions using electronic data messages or electronic documents. The same provision likewise instructs all government agencies to adopt regulations to carry out this purpose within two (2) years from the effectivity of the E-Commerce Law.

  In line with this mandate, the BIR will have to restructure its existing tax administration system within the said time span. Among the critical areas of tax administration which may be designed to accommodate transactions via electronic medium are the following: 

1. Filing of tax returns - The filing of tax returns may be done electronically via the Internet. In fact, the BIR is now securing the appropriate software solution for this endeavor.

1. Keeping of books of accounts - Even before the promulgation of the E-Commerce Law, the BIR has been allowing taxpayers to convert their manual books of account into an electronic format for the past ten years or so. This is subject to minimum restrictions; e.g., the computerized system must conform to generally