IT came as no surprise when Internal Revenue Commissioner Sixto Esquivias IV resigned his post over the poor performance of his agency. It has been reported that in the first nine months of this year, he was short of target by P39.2 billion. Also for September, the Bureau of Internal Revenue (BIR) collected only P56.2 billion, just a bit higher than the P55.8-billion collection in the same month last year. The full-year target collection for the BIR is P798.5 billion, and the betting is that it won’t meet its target. As Esquivias said of his resignation, “it was the honorable thing to do,” in the light of the large tax-collection shortfall.

But what problems really are besetting the BIR, which collects three-fourths of the country’s taxes, merits serious attention. Since 2001, five BIR chiefs have been appointed to the post. In the last three years, three of them have resigned on the issue of collection shortfall—Jose Mario Buñag, Lilian Hefti and Esquivias—and their departure leaves a void in the civil service, as all were deemed fairly competent and not dragged down by an integrity issue.

Of course, the main problem of tax collection is the global recession and the downturn in the Philippine economy affecting corporate and individual incomes. But there are other problems as well. Among them are widespread tax evasion, corruption within the bureau and inefficient tax administration.

And, as BIR officials lamented earlier, the revenue-eroding measures. One of which is the decision to reduce corporate-income tax to just 30 percent of gross income starting January this year, from 30 percent. Another is Republic Act 9504, which gave tax breaks to minimum-wage earners without giving back something to enable the agency to recoup the revenue loss, and the tourism development law. Such revenue erosion, however, needs to be balanced with the need to take care of the welfare of workers.

There is, too, the turf war. The Tax Management Association of the Philippines and other business groups had questioned the alleged encroachment of the Presidential Adviser on Revenue Enhancement (PARE), after Malacañang issued an order giving PARE tasks viewed as duplicating the powers of the BIR chief. Esquivias came under pressure for his apparent reluctance to “turn over” the Large Taxpayer Service (or LTS, accounting for 60 percent of collections) to PARE, headed by Narciso “Jun” Santiago.

So with only two months to go, the BIR is trying to shore up tax collection to close the gap by going after temporary bazaars and retail establishments that will be set up for the Christmas season, and insisting on its controversial 5-percent tax on campaign spending. BIR Senior Deputy Commissioner Joel Tan-Torres, a former partner at the SGV accounting firm who has been appointed officer in charge, may also have to contend with politicians who are loath to introduce tax reforms with the elections just six months away.

The impact of the BIR’s saga will really hit us when we reckon with the budget deficit. The target deficit for the year is P250 billion, but in the first nine months, the gap has widened to P237.5 billion, or only P12.5 billion short of target with just three months to go. Estimates say the deficit will balloon to more than P300 billion, way above last year’s level of only P68 billion.

The deficit will be bloated by spending for reconstruction in the wake of typhoons Ondoy and Pepeng. Of course, income-tax payments from typhoon-hit companies in Metro Manila and Luzon, which account for 66 percent of the total gross domestic product, are also seen to slide.

A huge deficit at the end of the year will put in question the government’s capacity to put the fiscal house in order. Rating agencies might just lower the debt rating, making it more expensive for the Philippines to borrow.

These problems with tax collection and budget deficit will most likely be inherited by the next administration. Our only hope is a turnaround in the global economy so our local industries and exporters can recover from the downturn. As things stand, hope of seeing any progress in all the other factors is quite dim.