I.T. and taxes - MY TWO CENTS’ WORTH by Dickson Co (DFNN.COM )

It’s income tax time. Thanks to President GMA, we had an extension from April 16 to April 18. (Unfortunately the BIR website www.bir.gov.ph was not updated with this good news.) On the positive side, the BIR website has a forms page where you can download the forms in an Excel file, a very welcome service.

Deciding to put the tax collection and filing process into an I.T. system is a no-brainer. The amount of paperwork is just phenomenal. Can you imagine processing more than 2.18 million (1999 returns) individual tax returns a year? (Am I missing something? I seem to recall a headline this Monday after Easter that said 28 million people went back to work. Hmmm…I wonder how the rest of the 26 million people pay their taxes?)

I wonder how many people actually work at the BIR just stamping that they have received the forms, then sorting out the checks, etc. with the time stamping happening at the last day. I can’t even imagine how they are processed. If say one-fourth of the people wait till the last day to file, then we should have 500,000 people filing on April 18 at the BIR offices. If say it takes 10 minutes to process one return, then we need 20 million man minutes or 2,083 man months; in short, a lot of people. There are two approaches to this problem: throw money at the problem either in headcount or technology; or one can reassess the process flow and rethink a cheaper and logical approach.

What is the role of the BIR in this income tax process? (By the way, the BIR also collects other taxes like VAT and excise, etc, but I limit this discussion to only the individual income taxes.) One, validate that the employer withheld enough from the employee. Two, validate that the employee is filing the right amount of taxes that he owes and actually paying it.

The theory is quite simple. There are three parties: the employer, the employee and the BIR. The BIR has one single database where the employers post their filings using the Internet. The BIR has another database where employees can post their filings via the Internet. Somewhere is BIR’s third database that converges, cross-references and compares these two databases. In the process, it validates and calculates the right tax amounts, and the tax amounts are credited or debited with the taxpayers’ bank account. Easier said than done of course, my friends at the BIR will point out several exceptions.

What if we simplify the process? Instead of filing these long forms, how about filing only index cards with only the critical data like the employee’s TIN and employer’s TIN? Then add just the number of dependents or deductions. The amount of compensation does not have to be inputted as we can get it from the employer or employers; if self-employed only then does the taxpayer fill in the amount. There is no calculation; the program does it. In fact, the next year, the index cards can be accessed online and the taxpayer just signs it. Very convenient, no?

We lower the tax rate but increase the penalty. If we make the cost of compliance of filing taxes cheaper and easier than tax evasion, then surely our tax collections will increase. In HK and Singapore, where the tax rates range between 15 and 20 percent, the tax-paying public just pays the taxes than spend the time, money and effort to figure how to avoid it. They find it more convenient to comply. In a 35 percent tax arena, there is so much more incentive to avoid taxes. Now you know why there are so many tax accountants in the US; then again my friends at SGV may not be too happy about this suggestion.

The BIR outsources its tax collection and processing and keeps its legal and managerial team. Could we save under the assumption that outsourcing would equate to efficiency and performance? I think so.

The country actually reduces its spending and the deficit. (Sorry, I can dream, can’t I?)

My Two Cents: I have not had the privilege of meeting Mr. Rene Bañez, but I wish him well and the best of luck in working through a quick, simple, transparent and logical process to meet the income tax filing needs of the people.

* * * Technology-free weekend? Not quite

The weekend before the Easter weekend, my wife kidnapped the kids and me to a deserted island off Palawan. Well, not quite deserted, since my idea of roughing it still requires the rooms to be air-conditioned. My wife thought taking us away from the city would give our lungs a respite from the pollution, and also remove us from TV (yours truly is a couch potato) and technology. My kids and I smuggled two cell phones onto the island. I was under the delusion that there would be a cell site on the island, there was none.

There was unlimited seafood, of course. There was sand. There was the unlimited blue green water that surrounded the island. There were herons, monitor lizards and sea turtles, though we missed the dugong or sea cow. My wife saw the biggest barracuda the resort’s marine biologist ever saw. (I told her the biggest one left Malacañang during People Power I.)

Although there was no cable TV, nor fixed line phones, nor cell sites, there was a satellite phone that cost an arm and a leg to use. A DVD player and VHS player kept the kids entertained when they needed a break from the beach. The cell phones quickly converted into mini Gameboys, thanks to the "games" mode of the phones. There was no Internet access on the island.

On balance, it was a good weekend and it was a good break. But I don’t think my wife and I can last more than four days without being able to connect to the Web; she needs her e-mail and ICQ and I need my browser. She and I are what you would call Web-addicts. Maybe by the time we retire, technology would be so ubiquitous that a deserted island or a deserted mountain cabin would have at minimum, Internet access. Thru my Dick Tracy video watch?

My Two Cents: My definition of retirement is mountain and sea, fresh air, no traffic and Internet and, of course, air-con (whether for heat or cooling). Until I do retire, for the sake of my sanity, these weekends are great!