The Bureau of Internal Revenue (BIR) remains one of the most corrupt government agencies despite the efforts of the new administration to promote a simpler, fairer and more efficient tax system. In fact, some revenue officials continue to extort money from taxpayers they audit regularly, as usual, even using the name of Commissioner Dulay and President Duterte to persuade them. Like the war on drugs, the ultimate victims in this “moro-moro” are the small and medium enterprises (SMEs), as large companies have tax consultants and lawyers to defend and protect them from harassment. Given this corrupt and inefficient audit program, I honestly think lifting the bank secrecy law at this time would only further encourage the “corrupt” BIR examiners to harass SMEs while getting more bribe money from the real tax evaders (and smugglers); often large taxpayers who can afford to bribe and save millions from not paying the right taxes.
If the government would insist, then we should ponder on declaring general tax amnesty across all types of taxes first — not just for estate tax from 2015 and prior years to allow the ignorant, non-compliant taxpayers, including tax evaders to start fresh by voluntarily paying their deficiency taxes without the threat of exorbitant penalties and compromises.
In fact, this can help offset the estimated revenue losses from lowering personal and corporate income tax rates, without relying on BIR audit and investigation.
Will this not be a precedent? Will taxpayers not anticipate this, resulting to a much lower voluntarily compliance? If we will not reform our tax administration, it will definitely be a precedent, and taxpayers will abuse it as well.
Commissioner Dulay already offered an expanded compromise settlement program for those with pending tax cases. This will benefit both taxpayers and the tax administration, as we will cut the costs of court hearings and legal fees.
In fact, based on cases filed with the Court of Tax Appeals, BIR usually loses its tax cases anyway.
Meanwhile, for those who have not yet been audited and investigated by BIR or have been regularly audited but tolerated to under-declare their income and assets as part of their compromised agreement, there’s no way the government can collect the right taxes unless we declare tax amnesty. This allows taxpayers to rehabilitate themselves and start paying the right taxes without compromises.
During the Large Taxpayers Tax Campaign Kickoff on Feb. 6, Commissioner Dulay presented his principal objectives in attaining collection target, improving taxpayer satisfaction, and protecting revenues by recapturing public trust.
He emphasized the broadening of the taxpayer base and segmentation of taxpayers to improve taxpayer satisfaction and improve voluntary compliance.
Here are my estimates of the impact of broadening or expanding taxpayer base:
From 2,320 large taxpayers contributing more than 60% of revenue collections to more than 5,000 will significantly increase total collections by at least 10% or around P150 billion;
From two million self-employed and 200,000 professionals to more than 5 million registered MSMEs via DTI Negosyo Centers and more than 2 million professionals will add at least P75 billion or 5% of total collections;
From 13 million employees to more than 30 million with focus on top executive declaring acceptable basic salary based on industry standards e.g., CEO receiving P30,000 monthly salary is not acceptable. Strictly monitoring these individual taxpayers will contribute at least additional P37 billion or 20% increase in collections from employees; alas, this will only be sustainable if there is a genuine reform in the tax administration. This means promoting a culture of honesty and integrity in dealing with BIR, in paying taxes and in doing business in general.
To support our tax administration, we proposed a certification program to help taxpayers to rehabilitate or improve their voluntary compliance owing to the fact that most fear BIR for possible harassment and extortion.
It is quite obvious that those who have been audited, or worse, regularly audited by BIR tend to control or limit the increase of their voluntary compliance to save from expected increase in deficiency taxes and compromise settlement including bribe money.
Those who are committed to help the government collect the right taxes have signed the pledge of support to promote a culture of honesty and integrity in paying taxes.
Thus, a Seal of Honesty (SoH) Certification Program is highly possible and has been presented to the BIR by the Center for Strategic Reforms of the Philippines (CSR Philippines). This landmark project would not only strengthen BIR’s ties with the private sector, but more importantly, would be one great leap towards cleaning up the tax system.
Indeed, tax amnesty would encourage taxpayers to pay right as they are cleared of their past wrongdoing. The catch? We cannot hold on to their promised compliance as they have imbibed corruption for so long, it would take a win-win situation involving the government and taxpayers to steer them towards a clean alternative.
Achieving this change relies on BIR adopting SoH in order to incentivize a committed few of the private sector as they pay the right taxes. This way, not only would these businesses take it upon themselves to avoid the flawed system of bribery, but they would also create a ripple effect. They would empower their fellow companies to work with the tax administration by showing that they themselves are doing just that.
After all, any attempt at tax reform would only be for nothing if it would still be implemented in a dirty manner. Sure, BIR is taking steps at the right direction, but how about the taxpayers? Thus, we need to work together in achieving a simpler, fairer and more efficient tax system — where those who earn more pay more taxes, while the least of us are protected.
Through SoH, the private sector is taking the initiative to better themselves and to help BIR achieve its target collection without compromises. However, it is upon the greater public to urge the agency to adopt this reform, and, in turn, uphold honesty and integrity even in their own households and workplaces.
Not only must the businesses and the tax administration unite each other, but every Filipino citizen must share the load as well in building a progressive nation — one taxpayer at a time.
This article was originally published on Business World.