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Not all is well in the ongoing Covid-19 pandemic war, including that of the tax collection front.
Preliminary data recently released by the Department of Finance (DOF) disclosed that the collections of the Bureau of Internal Revenue (BIR) and Bureau of Customs amounted to a combined total of P1.155 trillion for the first half of 2020. Compared to the P1.375 trillion collected in the first half of 2019, the tax collections are P0.220 trillion or 16 percent lower.
The collections are also P0.032 trillion or 2.76 percent below the revised target of P1.187 trillion for the January to June period of this year. It is to be noted that in April 2020, due to the impact of the Covid-19 pandemic, the Development Budget Coordination Committee in April 2020 reduced the 2020 annual tax-collection target of the two agencies to P2.997 trillion from P3.332 trillion, a reduction of about 10 percent. Definitely, the two principal tax collecting agencies are not faring too well meeting their targets for tax collections, which primarily provide the funding source for government.
The BIR, which accounts for the bulk of the government’s tax collections, reported P901.96 billion of collections in 2020’s first half. This collection period includes the months when strict quarantine measures were imposed to contain the spread of the Covid-19 pandemic that led to a virtual economic standstill in the country.
As a result, the BIR’s January to June 2020 collection is P170.5 billion or 15.9 percent lower than the P1.072 trillion it collected during the same period last year. The January to June collections are also P0.031 trillion or 3.38 percent less than the target of P0.933 trillion. Compared to the original goal of P1.335 billion, this deficit is 32 percent of the goal. The BIR’s annual collection targets were reduced to P1.744 trillion in Revenue Memorandum 15-2020, from P2.260 trillion in RMO 12-2020. The original target was P2.576 trillion as prescribed in RMO 2-2020. The current goal is a whopping 32 percent decline from the original tax collection target. Clearly, government is very much adversely affected by the pandemic crisis.
The BIR must continue to exert all efforts to help the Covid-19 pandemic warriors. During the crisis, the BIR should balance the strict enforcement authority with the benevolent taxpayer service orientation in engaging with the taxpayers. I have seen some positive changes in the way the BIR conducts its tax audits of taxpayers. A number of BIR offices now implement the faster approach of conducting high level audit by exception, rather than the extensive and time consuming data crunching investigations enforced before the pandemic crisis. The mindset being pursued is that taxpayers are encouraged to pay reasonable tax assessments on a timely basis without too much difficulty and problems.
The BIR should also continue to hire more “soldiers” for the Covid-19 war. News accounts disclose that the BIR has thousands of unfilled vacant positions, ranging from openings for clerks to positions for Certified Public Accountants and lawyers. The hiring of more personnel will provide to the BIR offices the warm bodies to support the tax collection efforts.
The BIR should fast-track its digital transformation initiative. In 2019, the BIR launched its digital transformation program intended to convert the BIR to a more responsive agency by 2030. The need to complete this transformation is very urgent and the timeline for the completion should be moved to an earlier date.
The ongoing efforts to create an investor friendly tax environment should be prioritized. The bill on Corporate Recovery and Tax Incentives for Enterprises is supposed to provide tax reform measures to create the tax conducive environment. Unfortunately, Congress was not able to pass the CREATE when it adjourned last month. This should immediately be passed and signed into law when Congress resumes in a few weeks from now.
All taxpayers should also help in the pandemic war. We, as taxpayers, should report our tax obligations honestly and on a timely basis. It is oftentimes difficult to do these during these pressing times when we are handicapped by financial and health concerns. But we should not forego in complying with our tax obligations that provide the lifeline for our country.
With the various stakeholders doing their share, we will win the Covid-19 pandemic war.
Joel L. Tan-Torres is the Dean of the University of the Philippines Virata School of Business. Previously, he was the Commissioner of the Bureau of Internal Revenue, the chairman of the Professional Regulatory Board of Accountancy and partner of Reyes Tacandong & Co. and the SyCip Gorres and Velayo & Co. He is a Certified Public Accountant who garnered No. 1 in the CPA Board Examination of May 1979.
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