Did you pay your taxes?

It was tax day yesterday and I hope you all paid your taxes. If you feel bad about giving government part of your hard earned money, you are not alone. I have always complained about paying taxes because as a long time journalist, I have seen how our leaders waste our money. Former NEDA Secretary Philip Medalla commented last Wednesday in a UP School of Economics forum held at Ayala Tower 1 that “the problem with taxes is that people do not like the quality of spending.”

Former Finance Undersecretary Romy Bernardo also commented that there is a perception that a lot of the spending is illegitimate. Maybe, electing the right person for president, one who is perceived to be honest, will make us feel better about paying our taxes.

There are so few of us who carry the burden of financing this government it is essential that we all do our share. It doesn’t matter if we don’t agree with how our tax money is being spent by Ate Glue and her political allies… even if she spent P2.5 billion of our money gallivanting around the world and dining on caviar. That is something we have to do something about on May 10. Right now, we just have to pay our taxes.

Last Tuesday, I sat in a presentation of BIR Commissioner Joel Tan Torres before the senior executives of the Lopez Group. What impressed me with Mr. Tan Torres and the group of BIR officials who accompanied him is a new sense of professionalism one did not usually associate with the tax collectors.

They told us what they are doing to improve tax collection and it is impressive to hear how they are using proven private sector management techniques to improve their collection efficiency. Mr. Tan Torres is himself a fresh recruit from the private sector SGV where he headed its tax practice for many years. If Mr. Tan Torres had a more credible boss, he is just the person who could be an effective tax collector if only because he will project the right image of professionalism and honesty to his staff.

It is obvious that Mr. Tan Torres has injected that same enthusiasm for best practices that animated his own staff at SGV in this critical bureaucracy.

For one, they are training BIR staff to specialize in various industries, establishing industry benchmarks and putting up a performance criteria that those of us who had long been in management are well aware of. And they are modernizing the approach to tax collection in spite of the limitations inherent in a government agency.

I was disappointed to learn from him that the carrot and stick approach of the so called attrition law that was passed by Congress in the hopes of improving BIR and Customs performance isn’t quite working. He did not dwell on the shortcomings of the law in the short amount of time we had but suffice it to say that they are preparing amendments that would make the law more applicable to the revenue collecting agencies on ground level. It apparently only sounded good in theory.

Mr. Tan Torres said he is well aware of the problem of enlarging the net of taxpayers and they are working precisely to do that. That’s what tax mapping drives are all about. He also cited the case of a bus operator who they successfully sued in court for tax evasion. He promised that more will follow.

They are devising plans to effectively cover many industries that are now not quite showing up in their radar. The underground economy must be tamed and made to pay their rightful obligations. The underground economy is not just composed of street vendors trying to eke a living. There are many pretty large scale businesses that manage to evade the taxman’s net… the bus and taxi operators, for instance. The BIR tax compliance drive should prioritize getting these tax evaders to pay their share.

Part of the BIR modernization effort is the acquisition of what Mr, Tan Torres described as the most powerful computer in the country. As they learn to fully exploit the potentials of this resource for data mining, it would become more and more difficult to cheat on our tax payments. Soon, the BIR will be like the US IRS where people think twice before they cheat on their taxes simply because the computer knows.

Incidentally, Mr .Tan Torres revealed that the top individual tax payer in the country today is Manny Pacquiao, the second is Willie Revillame and the third is Piolo Pascual. He couldn’t remember the names of all those in the top 10 list. Suffice it to say that the taipans and the billionaire politicians are not paying as much taxes as these entertainment icons.

Showbiz people have no escape. In the case of Revillame and Pascual, ABS-CBN deducts a withholding tax from their talent fees. In the case of Pacquiao, his fight purse is so well publicized it cannot escape the BIR’s attention. Poor Manny, he gets pummeled by the taxman twice, first in the US and then here.

And that is precisely the problem. It would be interesting to see how much the taipans are reporting as income. Given their high living, it would be very discouraging for the rest of us taxpayers to know if the fat cats are comparably paying a pittance. I remember a comment I heard from an accountant that we should not expect to see taipans in the top taxpayers list because that would indicate their tax lawyers and accountants are not good enough. The BIR should publish the list of the top 20 and if the better known names aren’t there, the BIR should use their powerful computer to find out why.

Other than the feeling our tax payments are being wasted by government, the other big hindrance to paying taxes is the complexity of it all. Simplifying tax collection should be a goal of the BIR but I suspect the tax collectors thrive on the complexity of the unpublished rules they constantly issue. One never gets the good feeling of being an honest taxpayer no matter how honest you try to be because tax examiners can always find fault because only they know what the rules are.

Former Budget Secretary Ben Diokno told the UPSE-Ayala Forum last Wednesday there is a need to simplify the tax law to both increase compliance and fight corruption that emanates from too much discretion for the tax collectors and their dark forest of rulings that are not codified. Simplified rules are specially called for in the case of individual income tax payers whose incomes are not fixed but also not in the taipanic realm.

Now that I am about to retire from salaried employment, I hope the tax authorities would listen to Diokno and devise a simple way of paying taxes. It would be nice to have a system that does not require the services of a tax accountant to figure out BIR rules.

Diokno also proposed reducing the corporate income tax from 30 to 18 percent to attract more foreign and local investments. But he wants to abolish the Board of Investments and let the BIR manage any fiscal incentives to investors. I agree with his observation that investors do business here or anywhere else not solely because of tax incentives but more because of a good climate to do business.

The other proposal of the economists on the panel is the lowering of the personal income tax to 18 percent while increasing VAT from 12 to 15 percent. This essentially is neutral for the tax payer but makes it easier to collect taxes from people who would normally not pay their right share of taxes.

It is said that the only sure things in the world are death and taxes. And we approach both with much trepidation. No matter how well Joel Tan Torres manages to professionalize the BIR, the tax collector will always be the grim reaper in our subconscious. Unless we miraculously have a government that can be trusted to spend our tax contributions honestly and wisely… don’t expect people to pay taxes and feel good about doing it too.

Ate Glue’s ratings

Here’s another good one from the Professional Heckler.

The Social Weather Stations says President Arroyo’s net satisfaction rating is down to –53 percent, an all-time low. That’s effectively an “F” rating or a failing grade she received from the Filipino people.

When asked for her comment, Mrs. Arroyo said: “Well, in that case, I am more than willing to repeat.”

Boo Chanco’s e-mail address is [email protected]. This and some past columns can also be viewed at www.boochanco.com