July 26, 2022
Full digitalization of the Bureau of Internal Revenue will be a huge game changer.
My colleague related to me her recent experiences in transacting with the Bureau of Internal Revenue (BIR). That experience gave her a nightmare she could not even imagine. Unfortunately, that is not an uncommon experience of persons dealing with the BIR. How would you feel if you are assured that a BIR personnel will assist you when you transact with them? Anybody could only imagine the feeling of exhilaration once introduced to a BIR personnel who promised to help and lessen tax liabilities arising from a simple transaction of buying and selling a piece of land. Of course, anyone will be glad. But the nightmare will get into one’s nerves once he/she is informed that such person (the BIR personnel) will rake inscrutable and gigantic amount of money from the transaction. Such BIR personnel’s share is larger than what the government will receive. The funny thing is that they can always devise means to lower the taxes payable but they must get half of the amount they insist was saved by the taxpayer. Take note that they always find ways to lower the liability in such a gargantuan difference. It is no wonder if from time to time you hear news about a BIR personnel being entrapped by NBI agents.
For example, in a purchase of a parcel of land for the amount of 100 million pesos, the taxpayer must pay capital gains tax or VAT and documentary stamp tax in the amount of, let’s say, 30 million pesos. These BIR magicians will offer a computation of taxes which is way lower than the usual, let’s say, 6 million pesos, and using the computations of BIR magicians, the taxpayer will only pay a lowered tax of 6 million. However, to be able to enjoy such a lowered computation, the taxpayer must agree to give to the BIR personnel half of the 24 million which is the amount supposedly saved by the taxpayer. In effect, the taxpayer, in concert with the BIR magicians, would be able to save 12 million pesos and actually deceive the government the amount of 24 million pesos. Who will not be tempted to bite this? But that will never be shared to a taxpayer until the taxpayer agrees to settle the tax liability in a manner they showed it. Because the taxpayer always wants to pay a lower amount of tax, he/she will always agree to the proposal.
In another example, when a Letter of Authority (LOA) from the BIR is issued to a business entity, the end result would almost always be settlement without opening the books of accounts of such company. A LOA empowers a revenue officer of the BIR to examine the books of accounts and other accounting records of a taxpayer to enable the BIR to assess and collect the correct amount of taxes. The LOA will be followed by a preliminary assessment for a huge amount. The BIR examiner would always find errors and lapses in the taxpayer’s books. Penalties and surcharges will always be imposed. Unfortunately, in-house accountants and business owners would always be willing to settle so that their books may not be opened. Sometimes, even the companies or business owners who are most ready to present their books would end up settling.
In this instance corruption comes in during settlement. There would be negotiation and tax liability may be lowered for a price. Sometimes, a 20 million pesos tax liability could be lowered to as low as 1 million pesos provided the company taxpayer agrees to give a certain amount which is almost always higher than 1 million pesos, the amount which will be paid to the government. In the end, the taxpayer wins, the examiner wins but the government loses.
The above stories are just examples of events that further degrade the integrity of the BIR and be labelled as one of the most corrupt agencies of the government. Every Filipino prays that this trend will change. Unfortunately, this practice seemed to be embedded already in such agency’s bureaucratic practices. As long as the BIR personnel or assessor or collector or officer has discretion in determining how much is the tax liability of a taxpayer, all transactions in that agency are prone to being tainted with corruption.
One of the solutions, I believe, is to remove the discretion from the BIR personnel. For example, in the collection Authorizing of taxes arising from the sale of real property, the process of securing the Certificate Registration (CAR) should be in such a way that the taxpayer and the BIR personnel could not negotiate. I am happy to hear a statement of the new BIR commissioner saying, “I am committed to strengthening tax administration through digitalization. This will make the tax collection system more efficient and less prone to graft and corruption.”[1] Digitalization will certainly lessen corruption in a colossal degree. Digitalization should be programmed in such a way that the taxpayer would have no choice but to pay the correct taxes. The discretion of the BIR examiner or assessor must be removed. In securing a CAR for transfer of titles of real properties for example, the BIR system[2] must automatically compute the tax liability once data are entered. There must also be a devise to ensure that the taxpayers and/or the BIR personnel are entering the correct data in every transaction. It should just be a mere PASS/FAIL or COMPLIED/UNCOMPLIED type of system totally removing the discretion of any BIR personnel. It must be completely automated and devoid of any human intervention. I still couldn’t imagine what type of computer system or program is needed to lessen, if not totally eradicate, the corruption in that agency. But with the many transactions I had with that agency, I strongly believe that digitalization will certainly make a difference.
References
[1]https://news.abs-cbn.com/business/06/30/22/profile-next-taxman-is-a-woman
[2] The system which should be created for its digitalization program.
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