The Department of Budget and Management (DBM) projected that the national government losses P400 billion to P1 trillion a year in collectable taxes. DBM Secretary Emilia Boncodin was quoted to have said that if government were able to collect just half of the conservative figure or P200 billion, "it would wipe out this year’s projected budget deficit of P450 billion."
Foundation for Economic Freedom (FEF) executive director Edmundo Coronel said that several factors contribute to the revenue losses including corruption, extremely tax system, inefficiency and non-cooperation to the public.
Coronel said that the present tax system "is complex, bizarre if not convulated" requiring tax experts while corruption in government persists with the public as witting or unwitting accessories to the crime.
"Expensive tax lawyers help us justify why we evade taxes and in certain celebrated cases (tax lawyers) help us get away with them on mere technicalities of the law."
Based on studies and consultations conducted by the FEF, the following revealed that 50-percent of tax deductions every year do not have a breakdown or itemization.
Likewise, it revealed that there was too much inequity in the system. The burden of taxation or paying taxes is shouldered by the fixed income earners while some professionals like lawyers often times pay minimal taxes.
In terms of the proposed gross income taxation, the FEF survey said that government should abolish the items for deductions in tax collections that would in turn result in various "discretionary" methods by the tax collectors, that is normally equated to deductions in the tax rates.
Nonetheless, the proposed gross the collection form has "the potential of reducing the complexity of the tax system."
Coronel cited the case of Peru wherein the Superintendente Administritarius Nacional de Tributarius (Sunat), the equivalent of the Philippine Bureau of Internal Revenue (BIR) reduced hundreds of taxes to only four – income tax, specific tax, import tax, and value-added tax.
The Sunat was reportedly able to increase by several times their revenue collection. However, it later on failed due to the inability of the national leadership to sustain the drive of the Sunat.
Meanwhile, the FEF said that another major factor leading to poor revenue by the BIR is the low pay and poor training of the bureau’s personnel.
"The BIR’s budget is measly compared to what it brings in, civil services impositions limit the ability of the bureau to reward and to punish, to promote and to fire. Hiring and managing people to do tax collection require selecting a certain kind of individual, who should be competent and with integrity," it said. "They should be managed as one would manage a sari-sari store that is managing the temptations to help oneself to the goodies in the store."
The survey results point to recommendations for a highly-professional and well-paid entity that would be run like a private collecting company.
"Perhaps we need a new entity run like a private enterprise with a clear mandate to do everything necessary to collect taxes," it said. "It’s people should be paid at par or better than the private sector just like the Bangko Sentral ng Pilipinas (BSP), Government Services and Insurance System (GSIS), Social Security System (SSS), and other government financial institutions (GFIs) like the Development Bank of the Philippines (DBP)."
Then it added that each professional in that "new entity" should manage the revenue collecting agency or entity "with the code of transparency to rival the Swiss bankers’ code of secrecy."
The FEF urged the civil society and other organized people’s organizations to participate in monitoring of the cases filed at the Office of the Ombudsman, and collect the provision of evidences.
It further called on business to pay the correct taxes in a manner that is transparent and accountable that "it robs itself if it resorts to bribery and corruption." At the same time, the foundation urged government to simplify and make the tax system equitable.
It called on the labor sector for vigilance as the value of their wages are eroded by corruption in the government and that "they have the role to play in ensuring that their employers perform the role of good corporate citizens."