WHILE the Bureau of Internal Revenue has made inroads as far as shoring up collections is concerned, the Organization for Economic Cooperation and Development (OECD) said the tax agency could generate much more revenue by improving big companies’ compliance.
In the report “Revenue Statistics in Asian Countries: Trends in Indonesia, Malaysia and the Philippines,” the OECD noted that “large firms remain an underutilized revenue source” in the Philippines, even as the BIR had already put in place the Large Taxpayers Service, a unit dedicated to collecting taxes from big establishments.
The BIR defines large taxpayers as Securities and Exchange Commission-registered corporations with authorized capitalization of at least P300 million; multinational enterprises with authorized capitalization or assigned capital of at least P300 million; publicly listed corporations; universal, commercial and foreign banks; taxpayers with authorized capitalization of at least P100 million belonging to the banking, insurance, petroleum, telecommunications, utilities, alcohol and tobacco industries; and corporate taxpayers engaged in production of metallic minerals.
In general, “the gradual reform and improvements in tax administration in the Philippines have been effective in helping to increase government revenue, cut public debt and improve fiscal stability,” the OECD noted.
Still, it said, “efforts need to be made in the near term to further raise revenue on a sustainable basis.”
“While significant improvements have been made to the tax administration in the recent past, tax yields remain constrained by a limited tax base, numerous exemptions and loopholes, and evasion,” the OECD said.
The OECD nonetheless commended the BIR for introducing a number of modernizing reforms to tax administration that not only improved bureaucratic efficiency within the agency but also facilitated taxpayer compliance.
The report noted that in the past, “most tax reform efforts in the Philippines, beginning in the 1970s, have been of limited success, held back by lukewarm political support and opposition from vested interests in the bureaucracy.”
Among the BIR-led reforms lauded by the OECD were the electronic filing and payment system (eFPS), the Run After Tax Evaders (Rate) and Stop-Filer programs. Rate brings high-profile tax evaders to court, while Stop-Filer flags taxpayers who had paid their dues before but had stopped.
“These and other initiatives have contributed to a 71-percent increase in the number of registered taxpayers in the Philippines in the six years between 2007 and 2013,” the OECD said, citing BIR data.
The OECD, however, said “the increase in registration has not been accompanied by a similar increase in tax revenue.”
In a separate statement, the OECD said “increasing tax revenues and ensuring sustainable domestic resource mobilization will be critical as emerging Asian economies seek to boost the provision of public goods and services and improve economic growth and living standards.”
In 2013, the Philippines had a tax-to-gross domestic product (GDP) ratio of 16.2 percent, with the OECD report noting that the share of total taxes collected to the economy have increased by 0.5 percentage points between 2000 and 2013.
While the Philippines is not part of the OECD group of developed countries, the country, under the leadership of Revenue Commissioner Kim Jacinto-Henares, is active in various initiatives aimed at improving tax compliance globally.