Time and again, the Bureau of Internal Revenue (BIR) has been tagged as one of the most corrupt institutions in the country.
Despite BIR Commissioner Billy Dulay’s efforts to stop corruption, bribery seems to be a convenient choice for both taxpayers and examiners, especially with the high tax rates and low salary of our examiners.
With the very costly and complicated tax system, businesses are encouraged to compromise on their tax assessment, reduce their voluntary compliance while setting aside a budget for their regular audit and investigation. This results in less than 2 percent contribution to total revenue collections of almost the same companies being audited every year.
Undeniably, tax evasion is as rampant as corruption in government. Taxpayers knowingly or unknowingly violate tax laws and regulations. The BIR is not the only one with the problem. The ignorance, arrogance and/or greed of taxpayers who fail to pay the right taxes are to blame, too.
So where do we begin?
Run after tax evaders seems to be the response of the BIR. But the big-time tax evaders have examiners, even high-ranking BIR officials, on their payroll. Can we trust them to catch the thieves if they’re in cahoots with them? Can we expect these examiners to correctly assess and collect taxes when they have been compromised for the longest time? Or should we consider abolishing BIR, declaring amnesty and starting fresh?
Deputy Commissioner Clint Aranas gave a different view on this, and I would like to share it for everyone’s consideration. He heads the Legal and Investigation Division of BIR, and according to him, there is a need to attract more competent and honest CPAs and lawyers to stop corruption and collect more taxes.
However, this is not possible if we will not exempt BIR from the Salary Standardization Law (SSL). When I was a BIR examiner, I took home less than P15,000 a month. At present, most BIR examiners still have a salary grade of 11 and earn just a little more than what I received in 2010. And you expect them to collect millions of revenues for the government? Honestly?
I am pushing for general tax amnesty to allow taxpayers to declare true profit and pay right taxes without the threat of being slapped with a tax evasion case or paying huge penalties and compromises. But we also need to clean the ranks of BIR examiners and officials by asking them to declare all assets, undergo rigorous training and take a competency exam. Those who will not qualify must be let go.
On high tax rates, we must maintain a positive outlook as we are finally legislating progressive tax schemes. While on tax administration, Commissioner Dulay is already taking steps to broaden the taxpayer base, reduce compliance cost by streamlining almost all processes and requirements, and discipline erring BIR examiners and officials.
So at this point, we have to ask ourselves—what are we doing? We cannot keep blaming the government for an inefficient and corrupt tax system if we do not do our part.
A number of business organizations and associations signed a pledge of support to help the government collect the right taxes, and promote a culture of honesty and integrity in paying taxes during the first Philippine Tax Congress held in September 2016. However, to encourage them to follow through on their promise, their relationship with the tax administration must be solidified.
With this in mind, the Center for Strategic Reforms of the Philippines (CSR Philippines) is taking a bold step to bridge the gap between the BIR and taxpaying public, especially those who are regularly audited (and compromised), through the Seal of Honesty (SOH) Certification Program.
Under this program, taxpayers will have the chance to change their ways and improve their voluntary compliance, without fear of harassment from the BIR.
This is very much aligned with our proposal to restructure our income tax system, achieved through these steps:
a) unburdening the ordinary employees
b) collecting more from the top executives who should be declaring at least P500,000 monthly gross compensation income
c) capturing the increasing MSMEs and professionals in the taxpayer base and improving their compliance from less than 50 percent to at least 80 percent
d) reclassifying some SMEs that are qualified as large taxpayers, increasing the base from 2,320 to 5,000 large corporations, who can account for more than 80 percent of our total revenue collections
This is where the public comes in. Knowing that there is already a stir in the private sector, ordinary citizens must push the government to make the needed reforms happen. To support this advocacy, we enjoin Filipino taxpayers to uphold a culture of honesty and integrity even in their own homes and offices.
We have to stop fearing the tax administration, much less the word “tax.” Instead, we must help the government rehabilitate the system and promote a simpler, fairer and more efficient tax system—here those who make more than enough money pay more taxes, and the poor are protected and served.
This article was originally published on Inquirer.