Commissioner Kim Henares appears on the right tract in running after tax evaders and delinquent taxpayers to boost government revenue collection.
But the Bureau of Internal Revenue (BIR) commissioner has too many obstacles to hurdle, both legal and administrative. There are laws that need to be repealed or amended for the BIR to dramatically increase its tax collection rate.
In July last year, Budget Secretary Florencio Abad estimated that the government was unable to collect roughly P388 billion in potential revenues due to rampant tax evasion by self-employed individuals, or professionals like doctors, lawyers, accountants, and engineers who dictate their own service fees on their patients or clients.
Abad noted that of the 1.8 million registered taxpayers in 2012, only 402,000 self-employed, business and professionals filed their tax returns. Data show that they paid an average of P33, 441 or a total of P13.4 billion, which accounts for only 0.13 percent of gross domestic product (GDP).
A few days ago, Henares said the government lost at least P61 billion in foregone revenues in 2011 from income tax holidays enjoyed by domestic and international business firms in free ports and economic zones.
The figure could be two to three times bigger because the P61 billion represents only the foregone revenues from 1,318 firms, or just 29 percent of the 4,581 firms registered in economic zones, whose 2011 income tax returns have been reviewed by the BIR.
To further illustrate the serious leakages in the country’s tax system, the Department of Finance and the BIR had made public an info graphic with data showing “ridiculously low tax payments” of self-employed professionals in Makati City in 2012.
The info graphic posted on the government’s Official Gazette showed that one out of two self-employed professionals in Makati paid less tax than a public school teacher. It revealed that 54 percent of 2,031 self-employed accountants, doctors and lawyers in four district offices of the BIR paid less than P35, 000 in taxes in 2012. A public school teacher earning P21, 500 monthly paid more tax of P35, 952 every year.
The same info graphic, which is part of the BIR’s Tax Watch project, showed that one of the 1,179 physicians in the city paid only P10 in taxes while one out of 534 lawyers paid only P200.
Two accountants also paid only P138 and P120 in taxes, amounts that are lower than the minimum wage in Metro Manila.
The discrepancies are too obvious to ignore. Laws prescribing penalties on delinquent taxpayers and tax evaders, be they in government positions, in Congress, in business, or ordinary citizens, ought to be given more teeth.
Simultaneously, measures must be in place to address corruption in the ranks of tax law enforcers like BIR assessors, treasurers, collectors and other tax agents to prevent them from working on compromise agreements with taxpayers and getting a share in the amount paid, which directly goes into their pockets.
Henares needs the cooperation of Congress to get legislative measures passed. But it appears that Congress is the biggest stumbling block to the enactment of bills like waiving the confidentiality rule on tax records once a person enters public office.
Well, there is no such bill pending in Congress right now. There were attempts in the past but none ever prospered even at the committee level.
Just a few days ago, news reports quoted Rep. Magtanggol Gunigundo of Valenzuela City raising a howl over a new BIR directive that required income tax filers to state their passive income, such as interests earned from bank deposits, in filing their income tax returns (ITR).
The congressman said Revenue Regulations 2-2014 (New Income Tax Forms) effectively compels a citizen to allow violation of his rights under the laws on secrecy of bank deposits, anti-money laundering and the tax code.
Gunigundo has a point. The BIR is attempting to secure information that would help compute a taxpayer’s bank deposits, then, match it with his income sources to check if he is paying the correct amount of taxes.
Republic Act No. 1405, enacted in September 1955, grants absolute confidentiality on bank deposits, including investments in government-issued bonds. The intention was to encourage people to save their money in banks and to discourage private hoarding so that the money can be used for productive purposes.
The 59-year-old law penalizes bank officials and employees who would provide bank information, except when the depositor agrees in writing, or in cases of impeachment, or upon court order in cases of bribery, dereliction of duty or when the deposits or investments are subject of litigation.
Henares is probably aware that a repeal of RA 1405 is a long shot. But it is what the country needs.
Remember that in the impeachment cases against former president Joseph Estrada and former Supreme Court chief justice Renato Corona, what brought them down were records of their bank deposits from unexplained sources.
Here is a chance for President Benigno Aquino 3rd and Congress to prove their sincerity and determination to curb corruption and finally adhere to the oft-repeated policy of transparency and openness by enacting a measure that will compel candidates in public office and appointees in government positions to sign a waiver on the confidentiality rule on bank deposits and investment.
They should have nothing to fear if they are entering public service to work for the public interest, as they always claim when campaigning but conveniently forget once they assume office.
Like what I said in my column last week, this is not an impossible dream. Pakistan is showing that it can be done.
A South Asian country that is perceived as more corrupt and with lower tax collection rate than the Philippines, Pakistan has shown the way to improve tax collection: require all electoral candidates to file their certificates of candidacy with their income statements and tax records for the past three years.
Last February 15, Pakistan’s Federal Bureau of Revenues made public in its website a tax directory with the details of the tax records as of June 2013 of the members of its parliamentarians and national and provincial assemblies.
The FBR provides a link to a PDF file that shows how much income tax each member of Pakistan’s parliament paid in 2013. On March 31, tax payments of private citizens will also be available in the website.
“This precedent has set high standards of transparency,” said Senator Mohammad Ishaq Dar, Pakistan’s minister for finance, revenue, economic affairs, statistics and privatization. As of Feb. 15, he said 1, 072 out of Pakistan’s 1, 172 parliamentarians have filed their income tax returns. “For the remaining parliamentarians, due process is being undertaken,” he said.
The Filipino electorate has heard enough promises for good governance from political candidates. The time calls for drastic action now.