Creative approaches to collecting taxes

AT the beginning of this year, even since late last year, both the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) were complaining that the tax-collection targets assigned to them for 2008 were unreasonably high.

They are concerned, after their failure to achieve their respective targets in 2007, that despite the continuous appreciation of the peso vis-à-vis the US dollar and the looming recession in the United States—which could trigger a global slowdown, high oil prices and dampen domestic consumption—there will still be lower tax collections from both corporations and individual taxpayers.

Finance Secretary Gary Teves, on the other hand, has countered that a growing economy should produce the same effect on revenues—more business means more taxes.

He has a valid point. Everybody knows that the 7.3-percent growth in our gross domestic product (GDP) has been the highest in 31 years, and even the prospects of a US recession is not expected to depress our GDP growth this year significantly.

So the challenge is for Teves and his two revenue-generating agencies to collect all the taxes possible to support the P1.227-trillion budget for 2008, the highest in our history.

We in the Senate supported the enactment of a huge expenditure program because we have a lot of catching up to do, after the underspending in the past that was aimed at narrowing the fiscal deficit.

We need to spend more on infrastructure, social services, health and education. It will be immoral to continue sacrificing the needs of the people just to show that we are spending only what we earn. Sometimes, too much prudence is also a bad thing.

I can appreciate the reluctance of Secretary Teves to accede to the requests of the BIR and the BOC to lower their collection targets because it means a higher fiscal deficit after the record-low P9.4-billion deficit in 2007.

On the other hand, I also understand the predicament of the two agencies. Their collection records for 2007 do not invite brighter prospects for this year.

My point is that we have already passed the budget, and we are all committed to raising the money to flesh it out, so to speak. But the government should not just push the revenue agencies to collect and collect.

The government should also support the BIR, the BOC and other revenue-generating agencies on two fronts: incentives for the agencies and their personnel, and new approaches to revenue generation.

These agencies have been operating under a system that has existed for many years. They can only do so much. True, they can try harder and maybe collect more, but not enough to catch up with the growing requirements of a burgeoning population and a growing economy.

If need be, the government should overhaul this system. Radical policy changes are needed, and policy changes should come from the top. Those on the top should also come up with creative approaches to help the BIR and Customs people collect more. These two agencies are the foot soldiers, the enforcers; their commanders, the policymakers, must provide the direction to accomplish their mission.

The proposed conversion of the BIR and the BOC into government corporations may be feasible, but it will not address the revenue requirement for 2008.

In the meantime, some creative approaches may be implemented in the department and bureau level. The BIR can establish and use industry standards to determine how much it should collect from an industry and from the individual companies that operate within that industry. For example, if an industry is making P1 billion a year, why should it declare only P100 million?

Incidentally, the Department of Finance must do some calculations on the real impact of the peso appreciation on taxes, except for exporters, whose losses are very real. The department must also find out how much revenue increase should result from every percentage growth of GDP with respect to each industry. Not all businesses are doing well—shutdowns are not unusual—even in a growing economy.

At the same time, it is not enough to distribute plaques or certificates of recognition to those who achieve or exceed their collection targets. Incentives must be provided to encourage our tax collectors to perform their task more efficiently, and the incentives must be more than the incentives offered by delinquent taxpayers and tax evaders.

In other words, Gary Teves and the government should do more than tell the BIR and the BOC to collect what they are assigned to collect. The two agencies must be provided with the tools and the means to do their job, and their people should be provided with incentives—benefits that they can take to the bank—so they will have something to expect when they accomplish their assigned tasks. 

You may send your comments/feedback to mbvillar_comments@yahoo.com.

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