The reforms being undertaken by the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) to improve collection efficiency will not effectively increase revenues to fund the Duterte administration’s programs without doing a comprehensive reform in the country’s outdated tax system, according to the Department of Finance (DOF).
Finance Secretary Carlos G. Dominguez III said both the BIR and BOC can carry out reforms without congressional approval, but the slew of tax-administration reforms are not sufficient to overhaul the country’s outdated tax system and raise enough revenues to fund the administration’s massive infrastructure program.
“The BOC and BIR have started putting in place the necessary reforms to upgrade tax administration, but these alone will not be sufficient to generate the high level of revenues needed for the infrastructure buildup and other priority programs to keep the growth momentum and transform the economy into a truly inclusive one,” Dominguez said.
In earlier reports, the finance secretary welcomed the statement of Rep. Dakila Carlo E. Cua’sof the Lone District of Quirino that the House Ways and Means Committee will likely pass this month the first package of the Comprehensive Tax Reform Program (CTRP) submitted by the DOF last September for congressional approval.
Cua said that, following his committee’s passage of this first CTRP package in January, the chamber will likely act on it by mid-2017.
Dominguez said this will put the bill within government’s target to start implementing the proposed tax reforms in 2018.
The BIR has started simplifying forms and procedures for small taxpayers to encourage tax compliance and ease payments, along with improving its electronic payment systems and enforcing risk-based audits, among others.
“At the same time, we are intensifying the anticorruption and tax-evasion efforts, recruiting 12,000 young people of integrity and competence to fill the BIR’s large vacancy,” Dominguez said.
Meanwhile, the BOC is completing the implementing rules and regulations (IRR) of the Customs Modernization and Tariff Act (CMTA), to boost its anticorruption and antismuggling campaigns while improving the facilitation of trade.
“Administrative reforms will be supplemented with more intensive border patrols and other measures to curb technical smuggling, including the use of fuel marking,” Dominguez said.
He said the Customs bureau is also planning to recruit about 3,000 young and talented people willing to work in the BOC.
Dominguez said the approval of the CTRP is crucial to the financial viability of the Duterte administration’s public-spending policy because it aims to correct our tax system’s flaws, such as nonindexation to inflation of rates and large scope of exemptions and special treatments that complicates tax administration that have for long prevented the BIR and BOC from consistently meeting, much less surpassing, their annual revenue targets.
“This is why tax-policy reforms are needed,” Dominguez said.
The finance chief said reforms in tax policy, which require congressional approval, will raise additional revenues of P163 billion in 2018 to help bankroll the government’s ambitious infra program. Package One of the CTRP proposes to lower personal income-tax rates, broaden the value-added Tax base, and increase the excise taxes on oil products and automobiles.
Image credits: Nonie Reyes