Tax and Corruption: Challenges and Solutions for the ... · Tax and Corruption: Challenges and Solutions for the Bureau of Internal Revenue- Philippines Deputy Commissioner Celia

Tax and Corrupt ion: Challenges and Solut ions for the Bureau of Internal Revenue- Philippines Deputy Commissioner Celia C. King Sydney, Australia – 13 April 2017

Agenda 1. Introduction to the Bureau

of Internal Revenue

2. Tax Corruption Challenges a. Pevalence

b. Causes and Forms

3. Tax Corruption Solutions a. BIR Policies and Programs to

Combat Corruption

b. BIR’s Accomplishments

4. Measures to Fos ter Good Governance in the BIR

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Developing Country Presentation, Philippines – Tax and Corruption: Challenges and Solutions for the Bureau of Internal Revenue - Philippines

1. Introduction to BIR

3

BIR 2016 Collection Performance

Bureau of Internal Revenue

(79%)

Bureau of Customs

20%

[CATEGORY NAME]

[PERCENTAGE]

Source: Bureau of Treasury, Cash Operations Report as of May 2016, http://www.treasury.gov.ph/wp-content/uploads/2017/03/mo_cor_revenues.pdf.

1. Introduction to BIR

4

BIR Strategy Road Map, 2016-2020 (Revenue Memorandum Order No. 6 – 2016)

2. Tax Corruption Challenges

5

. Pevalence: Corruption in the Philippines by the Numbers

US$10 billion Philippine government’s yearly losses due to tax related

corruption (Bloomberg Business, September 2013)

52 out of 144 Philippine’s ranking at the Global Competitiveness Index, 2014 - 2015

1 , 3, 5 1- Corruption

3 – Tax Regulation 5 – Tax Policy

Ranked 101 out of 176 countries in 2016 Corruption Perceprion Index

Source: Transparency International, Corruption Perceptions Index 2016, http://www.transparency.org/news/feature/corruption_perceptions_index_2016

8

.

Source: Social W eather Stations, The 13th SW S Survey of Enterprises on Corruption, Paper Presented at Hotel Elizabeth, Cebu City last 12 October 2016.

BIR with Poor Net Sincerity in Fighting Corruption, 2005 – 2016

Source: Social W eather Stations, The 13th SW S Survey of Enterprises on Corruption, Paper Presented at Hotel Elizabeth, Cebu City last 12 October 2016.

2. Tax Corruption Challenges

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Causes of Corruption

Low salaries of BIR employees (specifically the tax auditors and collectors)

Philippine tax system is marked by complex laws

and regulations

Excessive red tape

2. Tax Corruption Challenges

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Excessive politics and patronage

Pakikisama (smooth

interpersonal re la tionship)

Utang na Loob (debt

of gratitude) Kinship

CORRUPTION Causes of Corruption

Reference: Alex B. Brillantes Jr. and Maricel T. Fernandez, “Restoring Trust and Building Integrity in Government: Issues & Concerns in the Philippines & Areas for Reform,” International Public Management Review, 2011.

Audit of taxpayers (eLAMS)

Removal of excisable products

Processing of One Tine

Transactions (eCAR)

Data fix request

2. Tax Corruption Challenges Forms of Corruption in the BIR

Corruption Risk Areas

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Crit ical Area Corrupt ion Risk

Corrupt ion Scheme

Effect

Removal of excisable product

Collusion with taxpayer, bribery

Lack of personnel monitoring the removal of excisable product

Excisable product removed from the premises without paying the correct taxes

Audit of taxpayers (eLAMS)

Collusion with taxpayer, bribery

Closure of tax audit w ith deficiency taxes imposed less than the evaded tax liability

Los of tax revenue from audit

Processing of One Time Transactions (eCAR)

Collusion with taxpayer, bribery

Use of incorrect valuation or classification of property

Loss of tax revenue/delay in issuance of tax clearance

Implementation of data fix request

Collusion with taxpayer, bribery

Request data fix for stop filer case to favor a taxpayer

Resolution of stop filer case without paying the required penalties

3. Tax Corruption Solutions

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BIR‘s Policies and Programs to Combat Corruption

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Revalidation of all exis ting eLAs before revenue officers could continue tax inves tigations or audits under the Run After Tax Evaders (RATE) Program (RMO 57-2016)

Requiring all revenue officers to submit an inventory of all Outs tanding Lis t of eLAs

Reducing the number of documentary requirements and process ing time in the process ing or in the is suance of tax clearances , eCARs

Creating a special disciplinary committee to speed up the inves tigation of revenue officers who fail the tes t of integrity, competence and efficiency in the performance of their audit functions (RMO 54-2016) and

Conduct of trainings for personnel on public service values and ethics

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Programs to to Strengthen Good Governance in BIR

Use of information technology to

combat corruption

Promote taxpayers education

Cultivate and ingrain integrity to BIR employees

Set-up an independent anticorruption organization

BIR’s Accomplish-ments

Passed Integrity Development Review, from 2011 - 2016 (Office of the Ombudsman)

Awarded HR Seal of Excellence for having reached Maturity Level 2 under the Civil Service Commiss ion’s Program to Ins titutionalize Meritocracy and Excellence in Human Resource (PRIME-HRM) in March 2017

Ensuring t ransparency and educat ing taxpayers – increase in the number of feedbacks (including complaints) from taxpayers on the quality of our frontline services

BIR’s Accomplishments

No. of BIR Employees Facing Administrative Action, July – December 2016

BIR’s Accomplishments

Administrat ive Action No. of BIR Employees

Formally charged 57

Show cause orders issued 321

Preventive suspension orders served

40

Dismissal orders of the CIR for DOF confirmation

19

Source: Various Reports from the Internal Affairs Service – BIR, July to December 2016

Measures to Foster Good Governance in the BIR

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Conduct comprehensive taxpayer profiling and industry benchmarking

Streamline business processes, including review of issuances

Provide online facility for the processing of clearances and accreditation of brokers and importers

Simplify tax forms and reduce processing steps and documentary requirements

Continue the Run After Tax Evaders (RATE) Program

Implement the Attrition Law , discipline erring personnel and

Remove BIR from the Salary Standardization Law .

“ … the key factor in combatting corruption effectively is the political will or commitment of its leadership.

- Jon S. Quah National University of Singapore

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References

Abella, Edwin, et.al., eds. National Internal Revenue Code of 1997. Brillantes Jr., Alex B. and Maricel T. Fernandez, “Restoring Trust and Building Integrity

in Government: Issues & Concerns in the Philippines & Areas for Reform,” International Public Management Review, 2011.

Bureau of Internal Revenue. Angat Pa Pinas: 2015 Annual Report. ______________. RevenueMemorandum Order Nos. 6-2016, 40-2016, 54-2016 and

57-2016. ______________. Revenue Memorandum Circular No. 5-2017, CY 2017 Priority

Programs. Bureau of Treasury, Cash Operations Report as of May 2016,

http://www.treasury.gov.ph/wp-ontent/uploads/2017/03/mo_cor_revenues.pdf. National Tax Research Center. Cited figures from article retrieved in http://www.dof.gov.ph/index.php/veteran-solon-declares-dofs-ctrp-as-best- studied-tax-reform-bill/ Phua, Stephen, et.al. Tax Gap: Causes and Solutions. Paper presented at Conference on Global and Sustainable Growth and Development, New Delhi, September 2011. Quah, Jon S. “Curbing Corruption in the Philippines: Is this an Impossible Dream?” Philippine Journal of Public Administration, Jan. – Dec. 2010, vol. LIV, nos. 1-2. Social W eather Stations. The 13th SW S Survey of Enterprises on Corruption. Paper presented at Hotel Elizabeth, Cebu City, 12 October 2016. Transparency International, Corruption Perceptions Index 2016, http://www.transparency.org/news/feature/corruption_perceptions_index_2016