The author is Coordinator of Action for Economic Reforms.
The much-maligned Bureau of Internal Revenue (BIR) is fashioning a new image: that of a professional, efficient, transparent and innovative institution. This image is becoming a reality under the leadership of Commissioner Guillermo Parayno, Jr. The good news – amid all the uncertainty, jitters, and antagonism in the pre-election period – is that BIR achieved its collection target for 2003.
In fact, the preliminary data show BIR surpassed by P1.3 billion its hard target of collecting P425 billion. The growth rate of BIR collection in 2003 also outdid the rate of growth of the gross domestic product for the same period. This reversed the trend for 1998-2002, in which the growth of the economy in nominal terms exceeded the growth in BIR collection by more than twofold. Simply put, BIR’s performance in2003 was the best in the last five years.
It is likewise remarkable BIR has made a quick turnaround. Before Mr. Parayno became commissioner, it was in deep disarray, with revenue collection plunging and the mass of personnel revolting in light of its proposed reorganization and “corporatization.”
Mr. Parayno thus faced formidable challenges: 1) Arrest the decline in revenue collection, and meet the revenue targets despite the structural, policy and political constraints. 2) Revive the morale of BIR personnel and enlist their support to meet the revenue targets. 3)And have BIR gain a modicum of respect from the public.
Despite success, BIR’s and the Bureau of Customs’ recent accomplishments were not enough to decisively address the problem of the budget deficit. The burden of stemming the fiscal crisis thus shifts to the President and the Cabinet and to Congress. Sadly, the Gloria Macapagal-Arroyo administration and Congress have not complemented the efforts of revenue-collection agencies, having failed to implement policies or legislation that could have enhanced revenue collection.
Of course, much still has to be done towards institutionalizing a comprehensive set of reform measures that the Parayno leadership has set in motion. BIR is still infested with crooked and incompetent collectors who occupy sensitive posts. Its personnel receive low compensation, which thus makes them vulnerable to corruption. Implementing rules and operational policies are hampered by the political agenda of those in power. These are but a few examples of the problems that must be addressed to transform BIR into an efficient, responsive and respectable institution.
Yet, its fine performance in 2003, despite the odds, gives us hope that the institution can be reformed.
A few key strategies resulting in BIR’s fine performance are worth citing. The first is the BIR’s use of information technology to disseminate information, facilitate payments and compliance, and promote transparency. The benefits are huge. To name a few: Taxpayers can get and submit the required tax returns and other forms through the Web. Corporate taxpayers can make their tax payments electronically. Employees with pure compensation income whose companies have made arrangements with BIR no longer need to file their annual income tax returns. Corporations can now submit electronically their list of employees, together with an indication of the amount of tax withheld for each employee.
Diversion of tax payments has likewise been minimized as BIR uses electronic means to notify in two days taxpayers about its receipt of payment. For BIR, too, information technology has strengthened its capability to monitor tax compliance in relation to income taxes and value-added tax.
The second strategy is the forging of partnership with the private sector and civil society. In early 2003 Commissioner Parayno created the BIR-Private Sector Joint Project Monitoring and Implementing Unit. Through this mechanism, the private sector and nongovernmental organizations contribute to what is called “Good and Honest Governance Programs of the BIR.” Top corporations, chambers of commerce and business associations, television networks, and other private entities contributed in various ways to promote or disseminate BIR’s tax campaign.
It is rare to find civil society organizations cooperating with an agency that is publicly seen as corrupt and inefficient. “Huwag Taxsil,” a civil society network, took the courageous path of collaboration, while maintaining its independence to critique BIR. It has conducted a series of forums to promote public discussion of taxation issues and reforms, launched a website to promote tax consciousness and monitor BIR performance, and written policy papers.
Furthermore, it has worked with BIR in the implementation of reforms with regard to the withholding tax system and BIR’s internal and external audit system. The network is composed of academics from the University of Asia and the Pacific, reform-oriented middle-level officials in the Department of Finance, and advocates from Action for Economic Reforms and E-Lagda.
The third strategy is the adoption of innovative schemes that has resulted in an increase in tax collection and compliance. For example, BIR has been able to include in the tax net the ubiquitous tiangges by imposing an advance payment for business and income taxes.
A meticulous study of existing laws and regulations also led BIR to extract additional tax payments from some firms manufacturing branded cigarettes. Another innovative scheme is “BIR on Wheels,” in which BIR sets up a one-stop booths in places frequented by hard-to-tax professionals. BIR on Wheels attracted public attention for including in its coverage showbiz personalities.
The fourth (but not necessarily the last) strategy is for the BIR leadership to get consistent and steadfast support of the rank and file to effectively advance the tax campaign. As earlier said, BIR personnel had an antagonistic, confrontational relationship with the previous leadership. This arose from a controversial proposal to legislate the abolition of BIR and the establishment of a new “corporatized” revenue authority. Inevitably, the internal crisis led to the resignation of Mr. Parayno’s predecessor.
Keeping in mind the immediate objective is to significantly increase revenue collection in light of the fiscal crisis, Mr. Parayno knew he had to forge a cooperative relationship with employees and stem the disappointment, not to mention the demoralization, within the ranks. He thus had to de-emphasize the issue of the abolition of BIR in order to get the support of the rank and file. Lo and behold, BIR personnel were rejuvenated. And Mr. Parayno removed a stumbling block for BIR to relentlessly pursue the tax campaign and meet the targets.
Mr. Parayano’s specific attributes have served him well in making BIR a success story for 2003. As an engineer, he is very thorough with the processes and systems, but does not lose sight of the general goals. Asa psychologist, he knows how to combine carrots and sticks. As a military strategist, he waits for the opportune moment to attack and does not fear taking a tactical retreat. And as a technocrat, he has disdain for political partisanship. He will not use the office to promote the incumbent or to demolish the opposition.
It is not surprising, then, that an opposition candidate for the presidency, Raul Roco, has announced to businessmen that in the event of his victory, he would retain Mr. Parayno as BIR commissioner. We hope the other presidential candidates make the same pledge.