DEAR Mr. President:
Will you prioritize tax reform in your first 100 days? Can you also eliminate corruption at the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) in six months?
In the Tax Management Association of the Philippines (TMAP) Tax Policy Survey, you actually said that you would institute moves for a genuine comprehensive tax reform as a priority of your government, owing to the fact that the last comprehensive tax reform was in 1997—which was almost 20 years ago—and that the personal income tax brackets have not been adjusted since 1987.
I honestly feel unsafe with your hero complex to save everyone from despair.
For me, it’s too radical and dangerous, but if it will end corruption in BIR and BOC, you have my full support.
Everybody feels that even if they pay the right taxes, BIR will still make an assessment and collect more taxes from them. This isn’t entirely true, however, as only 10 percent of the total taxpaying population can be audited by less than 3,000 BIR examiners.
However, some BIR examiners abuse their mandate by harassing taxpayers with huge assessments, including penalties, rather than assisting them to comply with the regulations and pay the right taxes.
Same companies are audited every year and worse, only 2 percent or less of the total collections are from a BIR audit, while the remaining 98 percent are from voluntary payment.
This is probably one of the reasons why they didn’t vote for the other candidates.
They are afraid same bureaucrats will be appointed in power.
Although Commissioner Kim Henares worked very hard—even breaching the P1-trillion mark and filing more than 470 tax evasion cases—corruption in the Bureau continues to proliferate while more tax evaders enjoy a tax-free lifestyle.
Since you don’t mind copying ideas from other candidates, I suggest you start with Sen. Grace Poe’s plan to issue an executive order that will create a multisectoral Tax Reform Commission (which I also proposed) that will draft a comprehensive tax reform program.
Please don’t leave it to the Department of Finance, which can be guilty of paralysis by analysis.
Next, believe in the wisdom of Sen. Miriam Defensor-Santiago, who promised to cut income tax rates for both corporate and individual taxpayers down to 25 percent, which is the average income tax rate among the countries comprising the Association of Southeast Asian Nations.
You may also want to copy the idea of your friend, Sec. Mar Roxas, who proposed to review the estate tax as it amounts to “double taxation” since all income or wealth accumulated were already subject to income tax, among others.
There are other equally important tax issues which I believe you should consider, like the passage of Fiscal Incentive Rationalization, lifting of bank secrecy laws (starting with all government officials with graft and corruption cases), and tax amnesty, specially to transfer land ownership to our poor farmers in the country side.
As a tax advocate working with the small and medium enterprises (SMEs), it is important to encourage more SMEs to register and to comply with BIR. Based on our study, the three major problems of our tax system are: (1) too narrow taxpayer base; (2) too high income tax rates and; (3) too costly compliance costs.
Based on the World Bank report, if the Philippines wants to lower its income tax like other Asean countries, we should broaden first our taxpayer base and shift from direct to indirect taxation, which means collect more VAT than income taxes.
I know these are too many to comprehend since tax is just one of the problems you will have to deal with as President. But as Sen. Miriam Defensor-Santiago said, “The Philippine tax system needs to be overhauled. Major tax reforms are best done at the start of each administration when the President has a clear mandate.”
Let us help you.
We are organizing the first Philippine Tax Congress in September 2016 to bring together all stakeholders and tax experts in the country to discuss and propose a comprehensive tax reform.
But before that, you have to appoint good and honest Commissioners in BIR and BOC who will work on the full automation of their agencies and support the comprehensive tax reform agenda.
I was asked whom should you appoint and now I am making it public.
It is best to appoint someone from the ranks who knows the system very well.
I recommend Deputy Commissioner Nelson Aspe or Regional Director Alfredo Misajon as the next BIR Commissioner, and Deputy Commissioner Agaton Teodoro Uvero as the new BOC Commissioner.
Don’t take my word for it. Let your screening committee check their background if they are indeed the best persons to help us push for genuine tax reform.
(The author is the recipient of the 2015 Asia CEO Young Leader Award, The Outstanding Young Men (TOYM) and the Distinguished Bedan Award in the field of Accounting and Taxation. He is also president and chief strategy officer of the country’s first social enterprise in tax consulting, the Abrea Consulting Group.)