Change is coming at BIR?

The new Bureau of Internal Revenue (BIR) chief Charlito Martin Mendoza has a lot of cleaning up to do in an agency that is perennially hounded by corruption issues.

A lawmaker dubbed it as the second most corrupt government agency, next to the DPWH.

The good thing going for Mendoza is that he is starting on a strong footing amid optimism from the business community.

For one, the Semiconductor and Electronics Industries of the Philippines Foundation Inc. (SEIPI), which accounts for a significant 35 percent of the country’s electronics exports, expressed its unequivocal support for the appointment of Mendoza.

“Mendoza brings extensive experience... With a strong foundation in fiscal policy, public administration and institutional reform coupled with his integrity and proven leadership, he is well-positioned to lead the BIR.”

This is not surprising, given his background, seemingly tailor-made for the BIR’s systemic issues.

His stint as undersecretary of the Department of Finance for Revenue Operations provided critical, high-level policy exposure, particularly on complex tax collection issues.

This must have given him a broad view of the interconnectedness of economic shifts and the crucial coherence between policy and operations.

Prior to this, he served at the Bureau of Customs Port of Cebu from 2019 to 2022, where he led the district at a critical time, including the COVID-19 pandemic.

With this, he surely knows the realities on the ground when it comes to corruption, often synonymous with collection agencies such as the BOC and the BIR.

This combination of policy and operational experience is precisely what the BIR needs to transition from purely punitive enforcement to a system focused on efficiency and fairness.

SEIPI itself recognizes the significant role Mendoza will play in “advancing a revenue system that is transparent, efficient and responsive to the evolving needs of both the public and private sectors.”

Academically, Mendoza is a fellow Maroon. He holds a degree in Geodetic Engineering from the University of the Philippines.

He earned his law degree from San Beda University, where he placed third in the 2004 Philippine Bar exam.

Fixing the BIR

His experience and academic background have hopefully prepared Mendoza for the work that he needs to do to fix the BIR.

The task handed to him is monumental. He inherits a P3.219-trillion full-year collection mandate, a figure his predecessor expressed doubts about achieving.

He said, given the challenges, the BIR may collect P3.1 trillion, although he noted this is a conservative estimate.

The latest nine-month figures underscore the urgency: the BIR collected P2.32 trillion, falling short of the programmed P2.38-trillion target. Mendoza is now facing a tight two-month window to haul in at least P897 billion just to hit the 2024 goal.

LOA

More than the numbers, it’s trust and confidence in the BIR that needs fixing.

Mendoza arrives at a time when business confidence is reportedly low and public perception of government corruption is troubling – factors akin to a “lethal rust” on the integrity of revenue collection.

I have long heard that the so-called letters of authority (LOA) have been notoriously weaponized by revenue district officers to shake down businesses.

I personally have a friend, an entrepreneur, who has been victimized by BIR officials making money from LOAs.

At a Senate hearing on Monday, a lawmaker finally flagged the scheme, which has long been an extortion racket in the bureau.

The way it goes is that the BIR issues LOAs to businesses – big or small.

What is a LOA? It is the legal basis that authorizes specific revenue officers to audit a taxpayer’s books, records and transactions for a particular taxable period.

For businesses, it is scary and tedious. Thus, many of them would just opt to settle or offer a compromise to the investigating officers. They pay a certain amount and the LOA goes away.

It’s not necessarily because they are evading taxes. Some of them just don’t want the hassle. Who wants to deal with government agencies, anyway?

Their inefficiencies are dizzying and their lack of heart for genuine public service is heartbreaking.

The bureaucracy, unfortunately, is flawed by design to keep grease money flowing. I’m not just talking about the BIR.

Unfortunately, the money does not go to the state coffers but merely lines the pockets of unscrupulous government officials.

It seems that former BIR commissioner Romeo Lumagui Jr. was unable to fix this problem, although I’ve heard that’s not necessarily the reason for his departure.

Grapevine talk suggests a powerful bloc supposedly wanted him out, a request that President Marcos was forced to grant for political survival.

And then there are other wild theories, not unlike in the movies, including alleged mysterious deaths of BIR officials related to unabated corruption at the agency and unexplained wealth among ranking people in the bureau, including lavish homes in Forbes.

But Lumagui said he left the BIR in a much better state and consistently met its revenue targets.

Nonetheless, a huge responsibility rests on Mendoza’s shoulders, especially at a time when officials’ tenures are brief and uncertain.

We can only hope that he can successfully steer the BIR toward long-term fiscal transformation even before his next assignment.

He must not only make the BIR efficient but also rid the agency of corruption because it is the poison that seeps into our systems, the rot in our walls and the quiet fire consuming every good intention.

*      *

Email: [email protected]. Follow her on X 
@eyesgonzales. Column archives at EyesWideOpen on FB.