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Do we need a new BIR?

Do we need a new BIR? by: Rolando T. Devesa

Reaching tax collection targets is not a task for the ordinary Filipino.  It’s a herculean job -- a task seemingly fitted solely for the demi-gods. 

That’s why those appointed as BIR commissioners are top-notch professionals. 

Right now, the Bureau of Internal Revenue (BIR) is under the helm of a reform-focused CPA-Lawyer, whose integrity and competence has brought about positive changes in how things are done at the BIR.

From Day 1, Commissioner Kim Jacinto-Henares has implemented changes that were calculated to improve the delivery of services, as well as reduce graft and corruption at the BIR.   From the adoption of electronic Letters of Authority, streamlining of internal processes, closing of establishments that are non-compliant with the BIR rules and regulations, and of course, to the filing of high-profile criminal tax cases, the BIR is exhausting all administrative means at its disposal to better collect taxes.

What else can be done short of imposing new taxes? For one, there has to be a realization that the country’s premier tax collection agency, as an institution, must be improved. The BIR, as an institution, is simply an old car (not just an old model mind you, but a decades-old car) that is being tasked to perform like a brand new race car.  The continuing reliance on the BIR, as an institution,  to achieve the country’s  tax collection targets is like expecting an 85-year old man to beat a 20-year old in a 10K run.

Senate Bill No. (SB) 1481, filed by Senator Miriam Defensor Santiago, should be well looked into by this administration.  In filing SB 1481, the good Senator has explained that, “the BIR is hampered by at least three fundamental institutional constraints:

     (a)    Rigid personnel management system where promotion is based merely on loyalty and seniority  rather than exemplary performance (e.g., exceeding the revenue target);

    (b)   Compensation structure restricts the hiring of first-rate professionals;

    (c)    Strict line-item budgeting that limits the flexibility in the allocation of funds.”

SB 1481 calls for the creation of a National Revenue Authority (NRA) that will exercise the powers and duties of the BIR.  Unlike the BIR, which is headed by a Commissioner  (with the assistance of Deputy Commissioners),  the NRA is governed by a Revenue Board which is composed of four (4) representatives  from the government and three (3) experts in the fields of economics, accounting, law, business management, and other allied professions. The government representatives will each come from the Department of Finance, the Department of Budget and Management, the National Economic Development Authority (NEDA), and the Securities and Exchange Commission (SEC). The creation of a Revenue Board is an appreciation that tax collection cannot be left to the hands of a single commissioner. At the highest level, there will be a concerted drive towards increased tax collection, with inputs coming from the DOF, DBM, NEDA, and SEC, and experts from the private sector.

While members of the Revenue Board serve for a fixed tenure of office (with different period of expiry), lower officials and employees of the NRA will be hired on a fixed term performance-based contracts.  Thus, there might not be a need for the cumbersome Attrition law, as the NRA officials who do not measure up based on performance can be easily replaced.  This can be seen as an attempt to balance the benefits of security of tenure with the need to motivate higher individual performance.

Another important feature of SB 1481 is that the officials and employees of the NRA will not be disheartened by low pay since the NRA will not be put under the Salary Standardization Law.  The Revenue Board, under the SB 1481, is authorized to establish a compensation plan for the NRA.

In a way, SB 1481 is a recognition of the fact that it will take more than a few good men to clinch the battle for increased tax revenues; that an institution can motivate people to do more for the country; and that the BIR, as an institution, must have independence (at least to a certain extent) to pursue the war on tax collection. It is, plain and simple, an acknowledgement that a very old, and poorly maintained car, should not be tasked to race with a new convertible.  

When PNOY made his election promise not to impose new taxes, many people in the know are dubious of the feasibility of such pronouncement. Even international institutions monitoring our fiscal health have not shown wide optimism if increased revenues can be had without increasing taxes. While we need to continue with the administrative reforms started by Commissioner Kim Henares, we also need to start looking for more opportunities to expand these administrative reforms. Anyone would choose a new convertible over an old car, right?