The centerpiece of the controversy: Taxes and how to raise more of them.

Lost in the harangues is how to restructure the system for the government to collect effectively more tax revenues. And, just as important, obliterate graft within the BIR and among taxpayers themselves.

President Arroyo, no less, is engrossed with it. In fact, in the SONA she delivered last Monday, eight tax proposals were enunciated. She is expected to endorse them to Congress for legislation.

The President may as well heed some suggestions from one middle-level BIR executive. After all in her annual report she said nobody has the monopoly of talent. These proposals are just exactly what she has in mind — that is, to increase tax revenues without too much denting the cash registers of business and the pockets of individuals.

Over the weekend, I sat with an insider at the BIR and discussed with him his planned steps in increasing – even tripling – revenues from taxes, VAT, and income.

His advocacy: Change to direct taxation!

He is sure that if the system is revised – many sectors have been clamoring for this – the recurrent fiscal deficit of the government will be wiped out significantly.

For the time being, this BIR executive chooses to remain incognito.

Enumerated are the proposed modifications that this BIR insider discussed with me and how these can improve revenue collections:

1. Change the present taxation system to direct taxation which is much simpler and easy to monitor.

2. Impose straight taxation of 2 percent based on gross sales as income tax, and VAT of 3 percent of gross sales or automatic receipts. They are less complicated.

3. Increasing VAT to 12 percent (from present 10 percent) will be ineffective, and collecting the adjusted 2 percent will be an exercise of futility because taxpayers will claim 12 percent input tax just the same.

4. Stop the indiscriminate granting of tax exemptions, especially to big companies and multi-national corporations. This privilege as we all know is susceptible to abuse.

The above proposals are based on the insider’s disturbing observations of what is happening to the agency’s tax policies and the manner in which they are implemented. Thus:

1. Some taxpayers do not pay more than 2 percent of their VAT, while others pay no more than 1 percent.

3. Congress will stonewall these radical changes in taxation because of potential lobbying by those with self-interest, and by pressure from such influential groups as the Makati Business Club.

4. Rewards of 10 percent to informers of tax cheaters should be given right away. This will encourage civilians to participate in vigilant public service.

On top of these realities, the Makati Business Club came up with a report recently that jolted the government. It said, among others, that dishonesty is pervasive in business practices. To cite an example.

Only 35 percent of respondents issue receipts, while 21 percent keep only one set of accounts, and only 15 percent say they pay honest taxes.

"There is that assurance that direct taxation will fulfill the revenue goals of the government and the taxpaying public will be benefitted by it," says the BIR insider.

Further, he said direct taxation is simple – from bracketing to monitoring – and will confirm criticisms that the present system is too complicated, subject to abuse of discretion, and even presents differing interpretations of some revenue policies.

"VAT is supposed to be 10 percent of gross sales or receipts, less input taxes. Yet, many taxpayers pay VAT a measly 2 percent, worse others pay only 1 percent, when realities of business dictate that 60 percent is cost of sales. Hence, VAT should not be less than 4 percent," reveals my interviewee.

These taxes are based on receipts issued, not including transactions which are not issued receipts at all, he said.

"The feasible and pragmatic solution, therefore, is to impose straight VAT of 4 percent, and 2 percent income tax on gross sales or automatic receipts which are convenient to monitor, among other simplified procedures," the insider avers. Or, a combined rate of 5 percent for VAT and income taxes payable on easy monthly schedules.

Malacañang and Congress should take these proposals seriously. They can be the answer to what they have been planning all these years to fill government coffers.

The interviewee has reiterated that the so-called corruption in the bureau does not ever originate from the agency. "In most instances, it is the taxpaying public that initiates the wrongdoing," he says.

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