BIR: Feared, hated or loved

In the past two years, the Bureau of Internal Revenue has been extremely aggressive in its tax collection efforts especially since Kim Henares took over as chief, whose tough image is underpinned by her target-shooting prowess. While the tax bureau is still short of its revenue collection efforts, it managed to collect P86.1 billion in October ‑ still better than the same period last year by 22 percent.

Aside from intensifying efforts to go after tax cheats and purging the Bureau of corrupt officials and agents, the agency has been pursuing other avenues to increase tax collections, like pushing for the Senate version of the sin tax bill expected to give government additional P40 billion in revenues next year — a too optimistic target according to some people since it will raise 2013 targets to P1.278 trillion instead of P1.238 trillion.

The Commissioner is bent on changing people’s perception of the Bureau from a mere collection arm of government to a law enforcement institution — making people aware of the penalties for violating tax laws, saying Filipinos will not obey unless you put fear in them. To strengthen their resolve, the BIR wants to create an image following the old adage, “It is better to be feared than loved.”

The BIR however has come under fire for issuing RMCs that impose taxes on contributions to SSS, GSIS, Pag-IBIG and PhilHealth, and compelling taxpayers to submit additional information on financial transactions including bank deposits, stock trading and property sales (although this was later shelved). Non-stock and non-profit organizations, country clubs, exclusive recreational organizations and even homeowners and condominium associations are now also being subjected to value-added tax aside from income tax — in a reversal of earlier BIR rulings that exempted such groups from taxation.

The BIR chief however continues to be adamant and unwavering in her stance despite resistance from affected groups. Take for instance the 10 percent public float requirement for publicly-listed companies. Public float, or “free float,” are the shares of a publicly-listed company made available to the investing public. These do not include stocks owned by company officials, directors, management and controlling investors who hold these shares on a long-term basis.

This minimum public ownership rule had been suspended for some time following the global financial crisis, but Henares sought its reinstatement in 2010, saying some are abusing the preferential tax breaks on trade transactions. That’s because shares that are sold or bought through the stock exchange are only subjected to a 0.5 percent transaction tax instead of being levied the 5 to 10 percent capital gains tax. Apparently, it was the Securities and Exchange Commission that had also requested for a policy revision on public float to address liquidity issues and appease demands for more transparency and timely disclosure of information to investors.

The PSE questioned the legality of the BIR memorandum, threatening to go all the way to the Supreme Court, but Henares didn’t budge, imposing instead a deadline for compliance that ends on December 31. Companies who fail to comply by January 1, 2013 face sanctions that include suspension of trading for six months, delisting and a five-year prohibition from relisting. A number of companies including big ones however might just voluntarily delist, finding it difficult to comply with the minimum rule by year-end, since it would require billions of issuances in new shares. The BIR has threatened to impose higher taxes on non-compliant companies, saying capital gains taxes will be imposed which, admittedly, make a bigger dent on profit margins.

People who have not paid the right taxes in the past justify their actions by saying their money will just be wasted to corruption anyway, with an estimated 20 percent of the national budget lost due to corruption or approximately P250 billion gone annually. Certain sectors have criticized the BIR for its inability to hit collection targets, saying there is really no need to impose more taxes if only the agency became more efficient in collecting. This is also compounded by perceptions that corrupt BIR officials are a major reason why the agency has been struggling to hit targets. But the best way to make taxpayers honest is for them to see tangible proof where their money is going — through the delivery of public services like the construction of public transport systems, hospitals and better airports. 

This administration has made significant progress in its efforts to combat corruption, seen in improved ranking in the recent 2012 Corruption Perception Index by Transparency International where it moved up 24 points to 105th place from 129th place in 2011. In fact, today has been declared as the National Anti-Corruption Day in solidarity with the rest of the world celebrating International Anti-Corruption Day. 

Fighting corruption should be a cornerstone of any government, and the BIR chief admits corruption in the agency is something that would probably not be eliminated even during her lifetime — which is why she advocates stronger punishment for both the corruptor and the  “corruptee.”

Taxes are inevitable in this life. It is literally the lifeblood of any functioning government. Though it may not necessarily be hated, the tax collection agency is still not the most popular in any part of the world. Those who have religiously been paying the right taxes particularly regular employees whose paychecks have automatic tax deductions love the agency’s strengthened efforts to “equalize” taxation and make everyone accountable. The bottom line is most people are basically honest. They just want to make sure their hard earned money is properly spent. As one taxpayer bluntly put it, “Kung walang madaya, walang mandadaya.”

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