RP Finance chief says fiscal situation very serious

In a speech on Monday, Teves exhorted the BIR's revenue district officers to redouble their efforts to collect more taxes or risk losing the business sector's newly found confidence.

"We have a very serious situation," he said. "We face a tremendous challenge."

Teves made his remarks at the induction ceremonies for new BIR officer in charge Lilian B Hefti, who has taken over the reins of the government's biggest revenue agency after her predecessor, Jose Mario Buñag, was sacked for failing to meet collection goals in the first five months of 2007.

"Since the BIR accounts for more than 70 per cent of government revenues, [its] collection performance is closely monitored not just by the financial markets domestically, but by international observers as well," he said.

The tax agency's shortfall pushed up the government's benchmark Treasury bill rate during Monday's auction. Banks bid up the rates in anticipation of greater demand for cash to fund the ambitious spending program of the administration of President Gloria Macapagal-Arroyo.

While encouraging BIR officials to collect more taxes, the Finance chief also took a swipe at the agency's declining efficiency, which became evident in the first half of the year, despite the boost provided by the Reformed Value Added Tax Law.

"If you compare the BIR's revenue collection performance with that [of] other countries in the region, you will see that we still have a long way to go, and therefore [must] exert more effort to improve ourselves," he said.

In her acceptance speech, Hefti immediately adopted a reformist stance and laid out a list of measures meant to improve the agency's efficiency.

In particular, the new BIR chief zeroed in on improving tax collection efficiency, which was widely cited as the reason for her predecessor's removal from the post.

"Given the constantly evolving economic landscape, the ever growing needs of both government and the taxpaying public and the emerging complexity of business transactions, the bureau must continue to explore new ways to improve the quality of tax administration," she said.

The new measures include a review of all rulings granting tax exemptions and preferential treatment to certain corporate taxpayers; the possible implementation of regulations that were suspended in the past; intensifying the development of tax evasion cases, and the checking of compliance with withholding tax rules by the country's top 1,000 corporations.

Hefti said she would also check the withholding tax payments of expatriates working in the Philippines and prohibit BIR officials from issuing unnumbered rulings, which have been the source of graft in the past.

Other measures include an audit of 2006 internal revenue tax liabilities; the computer matching of figures of withholding agents with the reported figures of income recipients; and the close monitoring of taxpayers with declining tax payments.

Preliminary documents from the BIR as of June 27 showed that the taxes collected by the agency for the month amounted to only 36.9 billion pesos (US$803 million), still 19.62 billion pesos ($427 million) lower than the target of 56.52 billion pesos ($1.2 billion) for June.

The tax collections likewise represented a 10.92-billion pesos ($237.9 million) drop from the 47.82 billion pesos ($1.04 billion) recorded in the same month last year. For January to June, total tax collections amounted to 307.44 billion pesos ($6.69 billion), representing a 7.59-billion pesos ($165 million) increase from 299.85 billion pesos ($6.53 billion) the same period last year. However, compared with the P352.69-billion target for the period, the six-month collections were short by 45.25 billion pesos ($985 million).