BIR did all it can but still likely to miss 2013 target
“You can run, but you cannot hide from Kim Henares.”
Finance Secretary Cesar V. Purisima once told a group of Chinese businessmen in Manila, referring to his chief tax collector at the Bureau of Internal Revenue (BIR), the government’s main tax agency.
Perceived as one of the toughest government officials in the Aquino administration, the 53-year-old Henares’ no-nonsense approach has somehow helped to generate the much needed revenues that will fund social programs and services.
In 2013, the BIR was tasked to collect P1.253-trillion, equivalent to more than 60 percent of the government’s P2.006-trillion national budget for the year. However, the target will likely be missed by the agency.
While the BIR had already exceeded its 2012 full year collection performance after raising a total of P1.12 trillion in revenues in January to November, figure remains well below the 2013 goal.
To meet the full-year target, BIR needed to raise P133 billion in December alone and to reach that goal, Henares continued her campaign to catch tax cheats, plugging leakages, chasing evaders and crooked bureaucrats.
BIR vs. Pacman
In 2013, boxing superstar and Sarangani Representative Manny Pacquiao faced his toughest fight, this time against chief tax sheriff Henares.
Last November, the BIR alleged that Pacquiao has tax delinquencies amounting to a jaw dropping P2.2 billion, on prize earnings from top-billed matches between 2008 and 2009 in Las Vegas, USA.
But Pacquiao declared that he, through his promoter Top Rank, had already paid taxes in the US to BIR’s counterpart Internal Revenue Services (IRS). Henares, however, claimed the boxer can’t provide sufficient documents to prove his tax payments to US authorities.
Due to Pacquiao’s consistent failure to comply with BIR’s requirements, Henares sought the country’s Court of Tax Appeals to seize the lawmaker’s money, freeze it in the bank, or “garnishing.”
The BIR, however, garnished only two bank accounts amounting to P1.1 million of Pacquiao, who is considered one of the world’s richest athletes.
In December, entertainment website TMZ reported that Pacquiao was allegedly facing another tax battle with the IRS, the internal revenue institution of the US Federal government.
According to the TMZ report, the boxer turned lawmaker owes the IRS over $18 million in tax debt for his previous fights from 2006 to 2010.
Before Christmas break, Pacquiao met with Henares in her office in Quezon City to discuss his tax mess. Likewise, he made a courtesy call to President Aquino, however, details of their meeting were not disclosed to the public.
In 2010 after taking the helm, Henares revived a BIR campaign to catch cheats and promised no let-up. The agency had already several charges before the Department of Justices against personalities, including the alleged mastermind of the P10 billion pork barrel scam.
In August, the BIR and the Department of Finance launched a series of newspaper advertisements that uniquely rated several taxpaying groups based on their contributions to state coffers, instead of the quality of service or food taste.
Named as “tax watch campaign,” the initiative revealed key insights about payments from taxpayers in various classifications, which also aims to increase transparency in tax payments and appeal to the public to be conscientious in paying the right taxes.
The tax watch campaign is on top of the highly publicized court charges alternately filed weekly by the BIR and Bureau of Customs that started since President Aquino took office in 2010 after winning the election on an anti-corruption platform.
Since 2010, broadening the tax base has always been a goal of the Aquino administration and has stressed the need to strictly monitor statistics of different taxpaying groups.
The government has been counting on higher tax compliance among business establishments, retailers and professionals to shore up government revenues, which is heavily dependent on borrowings to fund the multi-billion pesos budget deficit.
In 2014, Henares assured that there has no plan to stop its weekly tax watch advertisement despite internal pressures, plus a few oppositions from professionals, particularly doctors, lawyers and accountants who were struck by the campaign.
Henares attacks professionals
In an unprecedented move, the BIR made a daring action against all professionals last September after the agency required lawyers, doctors and accountants to post their fees in their offices for greater transparency to the public.
The BIR directive, however, was opposed by doctors and lawyers, saying such an order would violate a law that prohibits their professions from self-promotion.
Even before the order of prominently posting their fees in offices, professionals have been the target of the BIR since 2010 because of their low tax payments.
But for 2014, the government expects taxes from individual taxpayers, including professionals, to increase by 11.3 percent on the back of its intensified drive against tax evaders.
Data from the Department of Finance showed that the BIR, government’s main tax agency, is looking at collecting P293.78 billion in individual income taxes next year from P263.85 billion this year.
Individual income taxes account for over a fifth of the BIR’s tax collection annually.
Purisima had already warned individual taxpayers engaged in highly profitable ventures but are paying less taxes that they would face scrutiny from the BIR.
Purisima said the DOF and the BIR would use their own top taxpayers list as basis to audit tax-eligible individuals. Likewise, a large difference in tax payments between two consecutive years might also be a sign for audit.
The finance chief also said that personalities who are engaged in highly profitable industries but are not included in the top taxpayers list will be included in the audit of the BIR.
The move is part of the BIR’s effort to boost the country’s taxpayer base of individuals and average tax payments to 1.8 million and P200,000, respectively. The twin objectives are seen to translate to an additional P360 billion in collections or 2.1 percent of the country’s gross domestic product (GDP).
The government has intensified its campaign against tax fraud due to declining collections from self-employed individuals.
Data from the BIR show that only 402,000 of the 1.8 million registered individual taxpayers and professionals filed their tax returns, paying an average of P33,441 or a total of P13.4 billion, which accounts for only 0.13 percent of the gross domestic product.
Starting this year, Henares will get another function that used to be performed by the Bureau of Customs. Internal Revenue Commissioner Kim S. Jacinto-Henares said her office received last December 27, 2013 an executive order coming from Malacañang that effectively transferred Customs’ post-clearance audit function to DOF-Financial Intelligence Unit (FIU).
Jacinto-Henares, the government’s revenue cluster head, said DOF-FIU is directly under the office of Finance Secretary Cesar V. Purisima.
“Customs Post Entry Audit Group (PEAG) will be dissolved because DOF-FIU is manned by different people. There were complaints before that PEAG is just being used to harass importers,” Jacinto-Henares told reporters in a recent roundtable discussion.