In search of a Customs chief — 2

WHY IS Bureau of Internal Revenue (BIR) Commissioner Kim Henares a good choice to head the Bureau of Customs (BoC)?

Let me recapitulate the main reasons:

First, Kim Henares has the essential attributes that are required to lead a corrupt and inefficient revenue collection agency. She has courage, tenacity, and determination. A friend has even described her as a “zealot.” I looked up the dictionary meaning of zealot. The online dictionary says: “a person who shows zeal.” That in itself is okay. But another meaning for zealot is a “fanatic.” It turns out that the original Zealot pertains to “a member of a radical, warlike group of Jews in Judea during the 1st century anno domini, advocating the overthrow of Roman rule.”

Precisely, what we need in our revenue-collecting agencies is that kind of Zealot — one who undertakes radical reforms, one who does combat to overthrow a system that breeds corruption, rent seeking, arbitrariness and inefficiency.

Zealots are a resilient lot. The Communist Party and the Talibans, to name some, survive despite defeats because, well, they are zealots. They are forever determined, and they never run out of energy. But what makes Kim Henares different from such zealots is that she does the right thing and she has public support. Her zeal has nothing to do with promoting a stultifying ideology but with making reforms work.

Her zeal is told in different stories; some are perhaps fictitious or exaggerated. It is said that she has had her classmates at law school investigated as to whether they had filed correct income tax returns. It is also said that her relatives and family friends avoid seeing her, lest they be subjected to her inspection. In an exclusive launch of a luxury car, she came to the event not to enjoy the cocktails but to check the buyers, leading some guests to immediately leave the gathering. And even in unguarded or spontaneous moments, she can spring a surprise. The story goes that while inside an elevator, she initiated a conversation with a low-grade employee of the BIR. She asked him his rank and noticing he was wearing a Rolex, she inquired how he was able to buy a Rolex despite his meager salary.

Another important characteristic she has is being a non-politician. The typical politician, like BoC Commissioner Ruffy Biazon, is prone to accommodating favors of other politicians. Biazon himself has admitted the problem of Customs officials having very influential political backers. And he did nothing about it; he was spurred to action only after PNoy reprimanded the BoC leadership.

The politicians dare not to seek favors with Henares. They know they will be rejected. In addition, they avoid a situation where Henares will turn the tables on them.

The second major reason is that Henares has chalked up many gains in tax administration and tax policy. The BoC will surely benefit from the lessons drawn from the tax reforms, which Henares led.

What is nice about Henares’ leadership is that she has been able to simultaneously meet different objectives. She has increased collections substantially, reduced corruption in the BIR, and boosted the morale of the rank-and-file.

Here are some of the data on revenue performance:

The BIR met and even surpassed its target for tax effort of 0.3 percentage point for 2011 and 2012. (The tax effort is the amount of tax revenues as a percentage of the gross domestic product or GDP.) BIR’s tax effort increased by 0.3 and 0.5 percentage point in 2011 and 2012, respectively. This increase was done without the benefit of new tax legislation. (The implementation of the sin tax law began in January 2013.) This suggests that the increase in the BIR’s tax effort can be attributed to the tax administration reforms carried out by the Henares leadership.

On the other hand, the BoC tax effort has been poor. For example, BoC’s tax effort decreased from 2.9% to 2.7% of GDP in 2012.

The growth rate in the BIR’s collection has grown steadily and impressively. In 2009, under the administration of Gloria Arroyo, the collection growth was negative. Collection increased to 12.34% in 2011 and 14.48% in 2012.

Similarly, the BIR’s tax elasticity shows good numbers, increasing from 0.79 in 2010 to 1.58 in 2011 and to 1.64 in 2012. This set of figures shows that the increase in BIR collection is buoyant, with an increasingly higher rate of tax collection than the GDP growth rate in the past three years.

We can expect more impressive figures for 2013 in light of the passage and implementation of the sin tax law. In the period January-April 2013, the revenues from the tobacco and alcohol excise taxes increased by about 25%, compared to the same period in 2012. Not only will the revenue target of 33.9 billion from sin taxes be met; it might even be surpassed, according to the Department of Finance. Suffice it to say that Commissioner Henares has played a key role in the passage as well implementation of the sin tax law.

The third reason is that the work at BIR and BoC is compatible. For example, both the BIR and BoC have responsibilities in the collection of value-added taxes. In addition, the BoC collection can significantly improve through obtaining third-party information. In this regard, tighter coordination or collaboration between BIR and BoC is necessary.

But what happens when Henares is transferred to BoC? Will it mean a diminution of the gains from BIR, which collects 80% of total revenues?

The answer thus is for Henares to be the concurrent head of both revenue-collecting agencies. Henares has instituted deep reforms, including system automation, in the BIR. The policies will be hard to reverse, considering, too, that BIR has a good pool of reformers, invigorated under Henares’s leadership. Henares’ continuing physical presence is nevertheless important to deter the continuing threat from hostile forces. But then, is it legally possible for Henares to head BIR and BoC simultaneously?

It can be a legal controversy. But a lawyer did some research, and he stumbled on a decision of the Supreme Court in Public Interest Center, Inc. v. Elma (June 30, 2006), which in turn was based on a Court resolution in Civil Liberties Union v. The Executive Secretary (August 1, 1991).

The Supreme Court said: “Public officials given the rank equivalent to a Secretary, Undersecretary, or Assistant Secretary are not covered by the prohibition.” The prohibition refers to Section 7 of the Constitution, which says: “Unless otherwise allowed by law or by the primary functions of his position, no appointive official shall hold any other office or employment in the Government or any subdivision, agency or instrumentality thereof.”

So, let us pursue a campaign to make Kim Henares the concurrent chief of BIR and BoC.

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