THE PHILIPPINE TAX COLLECTION SYSTEM Its Evolution and Direction
By: Estelita C. Aguirre Deputy Commissioner
I. INTRODUCTION The Supreme Supreme Court of the Philippin Philippines es has stated that that it is axiomatic in the law of taxation taxation that taxes are the lifeblood of the nation. Through the centuries, since the dawn of civilization and the birth of taxation, the veracity, and signicance, of this declaration remains unchallenged, and is in truth upheld time and again through war and peace, prosperity and recession. or this reason, the mission statements of virtually all tax authorities are crafted to highlight the mandate of collecting taxes for and at the least cost to government. !n overview of the mission statements that guide the tax authorities authorities of the !sia"Pacic#s !sia"Pacic#s developing economies, such as Singapore, Thailand, $ndonesia, %apan, &alaysia, 'orea, and the Philippines, bears out this observation. &alaysia#s $nland (evenue )oard, for instance, has declared their mission to be* +To collect taxes for the nation at minimum cost, to improve compliance and to institute eective enforcement through prevailing legal procedures.+ The Philippines# )ureau of $nternal (evenue, on the other hand, aptly states* +-ur mission is to collect taxes eciently and eectively, for and at the least cost to government, through impartial and consistent enforcement of internal revenue laws, and convenient and honest service to taxpayers.+ $ndeed, the collection of taxes remains one of the primary underta/ings of any government, in order to provide sucient funds with which a nation#s economy may be sustained and developed. $n this light, it has become the enduring goal of every tax authority, be it one that serves a developed or a developing nation, to see/ and implement strategies and technologies that shall support the continuing improvement of their collection systems. This paper shall shall explore explore the evolution evolution of the Philippin Philippines# es# tax collection collection systems, spanning spanning a period of more than nine decades, from the establishment of the )ureau of $nternal (evenue in 0123, to the present"day collection system being implemented by the country#s premier tax agency. The development of the various collection systems employed through the years shall be traced, to gain insights into the mechanics and policies behind each system, and how signicantly each, in its turn, has contributed to the achievement of the country#s ever" increasing revenue goals. II. THEORETICAL FRAMEWORK AND REVIEW OF VARIOUS VARIOUS MODELS Through Through the years, tax authorities authorities have have explored explored various various approaches approaches to continually continually enhance enhance the eectiveness of their collection systems. 4owhere is this more evident than in developing countries, where the advent of information technology and electronic communication has helped to bring tax administration out of a pen"and"paper cosmos into the world of ber"optic technology, $nternet access, and electronic fund transfers. $t was the consensus of the delegates of the tax administrations from the !sia"Pacic (egion to the 05th &eeting of the Study 6roup on !sian Tax !dministration and (esearch 7S6!T!(8 held way bac/ in 0195 in )ang/o/, that an ecient collection machinery is vital for successful tax administration, administration, inasmuch as the ultimate goal is to collect taxes due at the least cost. !s gleaned from the S6!T!( reports and discussions, some of the methods of collecting taxes which have been adopted by the member"countries are* a. Self"!ssessment System 7Pay"!s": 7Pay"!s":ou"ile8; b.
c. >irect !ssessment and Payment System; d. !nnual !ssessment and $nstallment Plan for =mployers; e. !nnual !ssessment for Self"=mployed Persons; and f. Provisional !ssessment and Programs. This paper shall focus on the rst two 7?8 systems, the Self"!ssessment and the
1. The Self-Assessment System !A"-AS-"OU-FILE# ! survey of the collection methods used by fteen 70@8 tax authorities disclosed that with the exception of Aietnam, which has a tax assessment system for wage earners and uses the self" assessment system for businesses, all countries have adopted the self"assessment system of taxation. The Philippines, %apan, &alaysia, Thailand, South 'orea, $ndonesia, !ustralia, 4ew Bealand and Singapore are all using the self"assessment system, as does the nited States, long referred to as the world#s only remaining superpower, and the nited 'ingdom, arguably =urope#s most inDuential economy. Similarly, the Self"!ssessment System is also being used by the tax administrations of $taly and the 4etherlands, as well as by !rgentina, one of South !merica#s more prosperous economies. $t is evident, therefore, that this particular tax system has truly become the choice of a greater proportion of the world#s developed and developing nations.
nder the self"assessment system, the taxpayer calculates the tax by himself, 7or through an accountant8 lls up his tax return, les it with the proper tax oce, and pays the tax due thereon, upon ling. The process by which the tax is computed and determined is what we call the +self" assessment+ method, and the resulting tax a +self"assessed+ tax. The act of tendering the payment of this self"assessed tax, on the other hand, is referred to as +voluntary payment+ or +voluntary compliance.+ The tax returns having been led, it is processed and subEected to the necessary des/ audit or eld audit, if warranted, of the taxpayer#s boo/s of accounts and other records. Such audits, sometimes result to additional taxes payable, referred to as +deciency taxes+. This process may thus be referred to as +assessment through enforcement+, in contrast to +self" assessment+. The distinction between a self"assessed tax and a tax assessed through audit or enforcement, is that the former, which is payable on the due date, becomes a +delinFuency+ if not paid, and can be collected immediately by means of administrative summary remedies. -n the other hand, a +deciency+ tax resulting from an audit is eected through the issuance of an assessment notice payable within a certain period of time, which becomes a +delinFuency+ upon the taxpayer#s failure to pay within the due date stated in the demand notice.
2. The W$thh%l&$n' T() System !A"-AS-"OU-EARN# Considered extensions of the principle of self"assessment are the withholding of taxes on compensation and the so"called withholding of taxes at source. $n the rst case, the employer 7or the payor8, by operation of law, becomes a withholding tax agent. =ach time an employee receives his wages or salaries, part of it is withheld by the employer"withholding agent as a partial advance income tax payment of the employee.
*. C%lle+t$%n ,y Enf%+ement Collection by enforcement is actually a ght or campaign against non"compliance. This +campaign+ is generally conducted through the identication of the sectors of business or industries, andGor segments of economic activities where the degree of compliance is low, and the subseFuent audit or investigation of enterprises and companies who are part of these selected industries. Countries adopting the self"assessment system have the tendency to focus on developing and improving their audit programs. $ndonesia adopted a more exhaustive auditing system through periodic visits to taxpayers. $n 'orea, the eld audit was extensively used to detect possible lea/ages in the tax system.
!udits and investigations give rise to deciency assessments, which normally result to disputes between taxpayers and tax ocers over the assessed liabilities. The usual procedure for disputed assessments is to settle them rst at the tax oce before resorting to tax courts. Countries have adopted administrative and Eudicial procedures in dealing with tax deciencies and delinFuent accounts. The means of recovery by way of civil penalties are* the issuance of warrants of distraint and levy on a taxpayer#s assets, followed by their seizure and sale to satisfy the amount of delinFuent taxes; the institution of civil or criminal action in court; and the issuance of a garnishment order to secure any monies held by a third party on behalf of the taxpayer. -n recovery techniFues for tax arrears, most countries start recovery proceedings with the service of notices of demand. !ll countries have established legal provisions to counter the failure to pay taxes, but some tax authorities elevate criminal actions to the courts.
4. V%lnt(y +%m/l$(n+e 0 s. C%lle+t$%n Enf%+ement %ames ). Iom, =xecutive >irector of the $nstitute for Tax !dministration 7California, S!8, in his lecture delivered at the %$C! G 4T! 6eneral Taxation Seminar in %apan from September ?1 to 52, 0115, holds that while the goal of modern tax administrations is to foster voluntary compliance, taxpayers will comply more readily with tax laws if they believe that their failure to do so will mean assuming a substantial ris/ of being penalized in a relatively severe fashion. -n the other hand, tax evasion models developed by economists !llingham and Sandmo in 01J?, and by Srinivasan in 01J5, hold that the rate at which taxpayers resort to tax evasion is dependent not only on the penalties involved, but also on the probability of detection by the tax authority, and on tax rates themselves. )y and large, research ndings on tax non"compliance point to the conclusion that there is no single or easy solution to the problem of non"compliance. ! balance of eorts focusing both on improved enforcement eectiveness and on increased co"operation and persuasion is needed. To improve enforcement eectiveness, further eorts should be made* 708 to decrease opportunities for non"compliance, 7?8 to improve eectiveness of examination and collection procedures, and 758 to communicate deterrence messages to taxpayers more eectively. To improve taxpayers# cooperation with the tax administration and increase their willingness to comply, tax administration must ta/e a more active role in educating taxpayers and providing assistance to those who need it. inally, the tax administration alone cannot change the citizens# feelings about tax compliance. 4on"compliance of erring taxpayers should be a concern of all government ocials and of honest and compliant taxpayers. !t present, the S tax administration is still strongly tilted toward punishment. This tilt is reDected in the resource allocations, in public images of the tax administration, and in willingness of taxpayers to overpay or to be reluctant to ta/e legitimate deductions in order to avoid audits. !udits are time"consuming and stressful aairs, and it appears that the prospect of an audit serves to inhibit tax cheating. The foregoing conclusion of &r. Iom may be true in the S and other developed countries, but not in developing nations. The impact of audit and investigation on eorts to raise levels of voluntary compliance is still an open issue in most developing countries.
III. THE !HILI!!INE TA COLLECTION S"STEM orty years ago, with a growing taxpayer population and limited resources, the Philippines# )ureau of $nternal (evenue 7)ureau8, adopted the self"assessment system when (epublic !ct
4o. ?535 was enacted in 01@1. The !ct provides that the +K tax imposed by this Title shall be paid at the time the return is led. Such tax shall be paid by the person subEect thereto.+ The substance of Section @L 7!8 708 of (epublic !ct 93?3 7otherwise /nown as, the Tax (eform !ct of 011J8 has retained this principle, as it states* +The total amount of tax imposed by this Title shall be paid by the person subEect thereto at the time the return is led. x x x+ Prior to the adoption of the self"assessment system in 01@1, there were relatively few income taxpayers, hence the )ureau, despite its meager resources, could eectively service a rather small taxpayer base. or instance, records show that in 013J, 00J,995 taxpayers led income tax returns. )y 01@1, however, following several relatively prosperous years after
1. V%lnt(y C%m/l$(n+e !s a continuing eort to constantly increase the volume of revenue collections generated under the self"assessment system, the )ureau has, over the years, eected diverse changes in its collection system. &ore than nine decades of innovation and restructuring are reDected in the history of the Philippine tax collection system. !t present, the methods of collecting taxes in Philippines, as in any country that adopts the self"assessment system, are* 708 Tellering; and 7?8 Collection =nforcement. Tellering refers to the acceptance of over"the"counter tax payments by !uthorized !gent )an/s 7!!)s8 or by (evenue Collection !gents 7in areas where there are no !!) branches8 from taxpayers, in accordance with established rules and regulations. Collection =nforcement , on the other hand, refers to the collection of delinFuency and deciency taxes assessed through audit or investigation. !.0. The Revenue Ofcial Receipt (ROR) System. The history of the Tellering system has its origins in the establishment of the )ureau in 0123. )ureau personnel at that time, however, did not have a direct involvement in the actual collection of taxes, since taxpayers were then reFuired to le and pay their taxes to their City or Municipal Treasurers, who issued the corresponding (evenue -cial (eceipts for such payments. The (-( System, however, precluded the direct supervision of the )ureau over the City and &unicipal Treasurers, considering that they were not under the employ of the )ureau, and were thus beyond the )ureau#s administrative control and Eurisdiction. !s such, the practice of enlisting the assistance of City and &unicipal Treasurers which was observed for fty"six years,
was dispensed with when the )ureau elded its rst Revenue Collection Agents in 01L2. Posted at the various City and &unicipal Ialls throughout the country, the Collection !gents too/ over the tas/ of receiving tax payments and issuing -cial (eceipts 7(-(s8, from the City and &unicipal Treasurers. !.?. The Revenue Tax ReceiptCon!rmation Receipt (RTRCR) System. The dramatic increase in the taxpaying population in the last Fuarter of the twentieth century, however, brought to the fore the need of the )ureau to further enhance the collection system. To cope with the demand for service and convenience of taxpayers, and to establish a more eective system of collecting taxes, and on the supposition that the use of the ban/ing system as a more reliable +collection agent+ shall minimize the incidence of defalcation of tax collections, then President erdinand &arcos enacted =xecutive -rder 4o. ?2L on %anuary 1, 01J2, whereby the Central )an/ was directed to receive tax payments through duly accredited !gent )an/s. $n 01J0, the )ureau inaugurated the payment through ban/s option with the RTRCR System. nder the (T(GC( System, a taxpayer les his return with the appropriate )ureau oce, where he is issued a (evenue Tax (eceipt 7(T(8 stating the amount of tax he must pay. The taxpayer then presents this (T(, and pays the corresponding amount of tax, to an !uthorized !gent )an/, which in turn issues the taxpayer a Conrmation (eceipt 7C(8, to ac/nowledge such payment. The taxpayer then returns to the (evenue >istrict -ce of the )ureau, to have his payment posted. Through the years, various statutes have amended the procedures and guidelines governing the receipt of tax payments by !gent )an/s. These are* 0. Central )an/ 7C)8 Circular 4o. ?1L, dated &arch 09, 01J2, on the implementation of =- ?2L; ?. C) Circular 4o. 503, dated %anuary 0, 01J0, also on the implementation of =- ?2L; 5. =- 551, dated September 1, 01J0, which amended =- ?2L; 3. C) Circular 4os. 55@ and 55L, Series of 01J0, on the implementation of =- 551; @. =- 15J, dated &arch 0, 0193, which established the criteria for the accreditation of !gent )an/s, and provided for the adoption of terms and conditions under which an !gent )an/ shall underta/e collection of taxes; L. Section 0? 7c8 of the 4ational $nternal (evenue Code, as amended, which provides that ban/s duly accredited by the Commissioner with respect to receipt of payments of internal revenue taxes authorized to be made thru ban/s, are constituted agents of the Commissioner. !.5. The "ayment Or#erCon!rmation Receipt ("OCR) System. $n 019?, the (evenue Tax (eceipt 7(T(8, was replaced by the Payment -rder 7P-8, to avoid confusion. The term +(evenue Tax (eceipt+ was actually a misnomer, the (T( being a mere payment order, and not a tax receipt. The P-GC( System is an enhanced version of the (T(GC( System, with better monitoring and control features. !.3. The $e% "ayment Control System ($"CS). Ness than two decades after the implementation of the (T(GC( System, however, the need to further increase the eciency, and expediency, of its collection system prompted the )ureau to introduce the $e% "ayment Control System ($"CS). The 4PCS, which was rst implemented in 0110, streamlined collection procedures and dispensed with the issuance of Payment -rders and Conrmation (eceipts. Taxpayers were thus allowed to le their tax returns, and pay the corresponding taxes, directly
to the !ccredited !gent )an/s. The )an/s would then validate the taxpayer#s copy of the return, remit their collections to the )ureau of Treasury through the Central )an/, and transmit to the )ureau copies of all tax returns led at their )an/ branches. The validated return then serves as the evidence of payment by the taxpayer. The 4PCS also mar/ed the rst time the )ureau made use of the ban/ debit system as a means by which a taxpayer could pay his taxes. The (-( System, however, is still in operation in those areas where there are no !uthorized !gent )an/s. pon receipt of tax payments, the (evenue Collection !gents are reFuired to issue (evenue -cial (eceipts 7(-(s8 to the paying taxpayers. ! maEor change to the accepted modes of tax payment was instituted in 011J, when the )ureau #iscontinue# the payment o& taxes through chec's. This move, although initially unpopular with the taxpaying public, was done to forestall the lea/age of tax payments. $n 011L, the )ureau uncovered the existence of a syndicate that was siphoning tax payments made in the form of chec/s. The syndicate, prior to its discovery, was able to +divert+ such chec/ payments with the help of revenue personnel 7who are actually members of the syndicate8 who, although unauthorized to receive such chec/ payments, encouraged unsuspecting taxpayers to entrust to them their tax payments. These payments were then deposited in ban/ accounts maintained by members of the syndicate under ctitious names, in collusion with ban/ employees. a/e machine validations were printed on the returns, which were then given to the unsuspecting taxpayer. !s such, tax payments did not enter the collection system, and therefore, no payments were posted in the taxpayer#s ledger. This practice was uncovered through the Stop"ilerG4on"iler Program of the )ureau, an underta/ing that follow"up taxpayers without recorded tax payments. !s a solution to the problem, and to encourage the use of the ban/ debit system as a more ecient means of paying taxes, the )ureau opted to stop the use of chec/s. Taxes, then, could only be paid with cash or through debit advices directly to !!)s where taxpayer maintain savings or current accounts. The year 0119, however, saw the repeal of the ban on chec/s as tax payments, when the )ureau promulgated Revenue Regulations $o. *+, which provided for the acceptability of chec/s as tax payments 7eective %uly ?2, 01198 once again, due to the inconvenience experienced by a taxpayer who does not maintain an account with any !!) within the Eurisdiction of the (evenue >istrict -ce where the taxpayer is registered. !.@. The Collection an# an's Reconciliation (CR) System. The most recent innovation of the )ureau in the area of collection remittance and monitoring through the ban/ing system is the Collection and )an/s (econciliation System 7C)(8, which is one of the maEor delivery systems of the )ureau#s computerized $ntegrated Tax System 7$TS8, and is actually a computerized and enhanced version of the 4PCS. >eveloped by !ndersen Consulting for the )ureau, and piloted in six 7L8 (evenue >istrict -ces, the C)( has since been rolled"out in eighty"eight 7998 other (evenue >istrict -ces. )y the end of the rst semester of 0111, it is expected that the computerized C)( System will cover all (evenue >istrict -ces nationwide. The C)( basically provides for the capture, validation and processing of tax payment data. $t supports the )ureau in monitoring the performance of its !!)s and (evenue Collection !gents, and reconciles collections based on a taxpayer#s returns and reports from the various Collection !gents. )rieDy stated, its main obEectives are* 0. To capture all data on tax payments made through the !!)s, (evenue Collection -cers 7(C-s8, and deputized &unicipal Treasurers;
?. To ensure that all payments made at the various collection agencies are reDected in the correct taxpayer account ledger; 5. To ascertain that all payments collected have been accurately remitted by the collection agencies, within the deadlines provided by law; 3. To monitor and control the accountabilities and performance of the !!)s, (C-s and deputized &unicipal Treasurers involved in the )ureau#s collection process. Presently, some !!)s are electronically lin/ed to the )ureau#s (evenue >ata Centers. This has enabled them to transmit collection data within twenty"four 7?38 hours through the =lectronic >ata Transfer 7=>T8 System and the Nimited )an/ >ata =ntry 7N)>=8 System. $n the recently issued (evenue &emorandum -rder 4o. 3"11 7dated -ctober ?J, 01198, !!)s were directed by the )ureau to pay all types of taxes due from ban/s, except for capital gains and documentary stamps taxes, through the =lectronic >ata und Transfer $nstruction System 7=T$S8. ull implementation of the =>T System nationwide is a dream of the )ureau that may be fullled in the near future. !.L -nhance# CR System &or the arge Taxpayers /ivision. ivision, for verication of the completeness of the returnsGpayment forms, prior to presenting them to the )ureau#s authorized !gent )an/s for Narge Taxpayers. pon receipt by the )an/ of a tax payment, the taxpayer#s returnGpayment form is validated and the corresponding amount is automatically credited to the savings account of the )ureau of Treasury 7)T(8, which the )T( maintains in the branches of all !!)s authorized to receive tax payments from Narge Taxpayers. !ll such payment data are then transmitted electronically to the )T(. To ensure that the )an/s accurately report their collections, the )T( in turn furnishes the )$(#s (evenue !ccounting >ivision and the Narge Taxpayers >ivision with daily reports on the remittances of the Narge Taxpayers# !!)s. The present system at the Narge Taxpayers >ivision oers advantages to the taxpayers, and to the 6overnment. -n the part of the taxpayers, the prompt remittance of tax payments to the 6overnment coers is assured. >iversion of tax payments is eectively eliminated, since payments are credited directly to the )T( at the time of payment. -n the part of 6overnment, daily collections are easily monitored, since the collection data comes from only three 758 )an/ branches, all of which are located within the premises of the Narge Taxpayers >ivision. -n the whole, the advantages observed from the C)( implementation at the Narge Taxpayers >ivision are* a. Timely identication and recovery of tax liabilities; b. $ncreased eciency in the monitoring of collections, remittances, under"remittances, and accountabilities; and c. Timely identication of stop"lers and non"lers. To date, the )ureau continues to explore innovations in collection methods, particularly in light of the increasing popularity of electronic fund transfer methods and computer"based nancial transactions, as it moves toward the expansion of the Narge Taxpayers# C)( to include the next three hundred Narge Taxpayers by the end of the year, and ultimately, all of the Top 0,222 Taxpayers who account for eighty percent 792M8 of the )ureau#s total revenue collections.
$t is hoped that the advent of the twenty"rst century will witness more signicant achievements by the )ureau in its Fuest for greater eciency and eectiveness in its eorts to encourage voluntary compliance with the tax laws. 2. C%lle+t$%n ,y Enf%+ement -ne approach toward the incessant battle against non"compliance is the identication of the sectors of business or industries andGor segments of economic activities where the degree of compliance is unacceptably low. This reFuires a system of measuring the taxpayers# compliance collectively, through the setting of standards or benchmar/ing, and focusing audit eorts in selected areas. $n this aspect of tax administration, we are still behind the tax administrations of highly developed countries, which have established eective methodologies for measuring non"compliance, such as the nited States# Taxpayer#s Compliance &easurement Program 7TC&P8. (elying on the general experience, intuition and gut feel of the (egional >irectors and (evenue >istrict -cers, who are more familiar with their respective Eurisdictions, and the little empirical data that exists, the !ssessment Service, headed by the !ssistant Commissioner for !ssessment, under the supervision of the >eputy Commissioner for -perations, develops 7subEect to the approval of the Commissioner8 the Selective !udit Program every year, to set the parameters for the audit of taxpayers that appear to have great tax potentials, yet manifest low tax compliance. Iowever, the !udit System under the computerized $ntegrated Tax System shall, once in place, provide much"needed empirical data for a rational, obEective and impartial method of selecting cases for audit. Presently, the )ureau has three groups of examiners and investigators* 708 the (evenue -cers for !ssessment who are assigned in the (evenue >istrict -ces; 7?8 the (evenue -cers specially assigned to policy cases of selected industries, who are assigned at the 4ational -ce 74-8; and 758 the revenue investigators assigned at the Tax raud >ivision in the 4- and at the Special $nvestigation >ivisions of the (egional -ces. They number a little less than three thousand 75,2228, and are the collection enforcers bringing in additional taxes on top of the amounts voluntarily paid by taxpayers. *. C%lle+t$%n %f Del$n3ent A++%nts >eciency taxes which are unpaid on their due dates give rise to delinFuent accounts. Tax authorities have two distinct remedies available to collect them, administrative and Eudicial. Section ?2@ of the 4ational $nternal (evenue Code species the civil remedies available to the tax ocers as follows* 4SEC. 256. Reme&$es f% the C%lle+t$%n %f Del$n3ent T()es --- The civil remedies for the collection of internal revenue taxes, fees, or charges, and any increment thereto resulting from delinFuency shall be* .
a. )y distraint of goods, chattel, or eects, and other personal property of whatever character, including stoc/s and other securities, debts, credits, ban/ accounts, and interest in and rights to personal property, and by levy upon real property and interest in or rights to real property; and
a. )y civil or criminal action. =ither of these remedies or both simultaneously may be pursued in the discretion of the authorities charged with the collection of such taxes* "rovi#e#, ho%ever, That the remedies of distraint and levy shall not be availed of where the amount of tax involved is not more than -ne hundred pesos 7P0228.
The Eudgement in the criminal case shall not only impose the penalty but shall also order payment of the taxes subEect of the criminal case as nally decided by the Commissioner. The )ureau of $nternal (evenue shall advance the amounts needed to defray costs of collection by means of civil or criminal action, including the preservation or transportation of personal property distrained and the advertisement and sale thereof, as well as of real property and improvements thereon.+ The term +distraint+ refers to the seizure by government of the personal property 7tangible or intangible8 of a taxpayer, to enforce the payment of his tax liabilities. -n the other hand, +levy+ is the seizure by government of a taxpayer#s real properties and interest in, or rights to, such real properties, in order to enforce the payment of taxes. $n certain instances, however, the Commissioner of $nternal (evenue may grant a compromise of deciency taxes, pursuant to Section ?23 7!8 of the 4ational $nternal (evenue Code 7as amended8, which is stated hereunder* 4SEC. 257. Ath%$ty %f the C%mm$ss$%ne t% C%m/%m$se8 A9(te (n& Refn& % Ce&$t T()es. : The C%mm$ss$%ne m(y : 7a8 Compromise the payment of any internal revenue tax, when* 708 ! reasonable doubt as to the validity of the claim against the taxpayer exists; or 7?8 The nancial position of the taxpayer demonstrates a clear inability to pay the assessed tax. The compromise settlement of any tax liability shall be subEect to the following minimum amounts* or cases of nancial incapacity, a minimum compromise rate eFuivalent to ten percent 702M8 of the basic assessed tax; and or other cases, a minimum compromise rate eFuivalent to forty percent 732M8 of the basic assessed tax. eputy Commissioners.+ The Commissioner is li/ewise vested with the authority to abate or cancel a tax liability, subEect to the following conditions set forth in Section ?237)8 of the 4ational $nternal (evenue Code*
1.
1.
The Tax Code allows for the compromise of all criminal violations, except for those already led in court, or involving fraud.
IV. COLLECTION !ERFORMANCE; VOLUNTAR" AND ENFORCED The )ureau#s !nnual (eports for the past ve 7@8 years, reDect the following collection data* TOTAL COLLECTIONS In ,$ll$%n !es%s#
SOURCES
1<<7
1<<6
1<<=
1<<>
1<
090.2J
?2?.L9
?3J.5L
502.@5
[email protected]
Collection from =nforcement
@.09
9.LL
9.13
5.9L
0.11
Collection from >el. !ccts.
2.59
2.03
2.01
2.0@
2.5?
<>.5@
<6.?@
<=.7@
@
<<.*> @
@ %f Enf%+ement
2.?@
7.1@
*.6@
1.2@
5.6<@
@ %f Del$n3ent A++%nts
5.2@
5.1@
5.1@
5.1@
5.57@
155.5@
155.5@
155.5@
155.5@
155.5 @
Aoluntary Compliance
TOTAL M %f V%l. C%m/l$(n+e
TOTAL
$t is evident, therefore, that voluntary compliance contributes the lion#s share in tax collection eorts, while enforcement eorts appear to produce minimal results. Iowever, the enforcement examiners claim that their eorts are measured not by the amount they collect, but by the impact of their enforcement activities on voluntary compliance by taxpayers. $ndeed, the validity of this claim is most dicult to do, and the measurement of the degree or level of compliance of taxpayers, as well as the impact of enforcement on voluntary compliance, is not attempted in this (eport.
V.
CONCLUSION
Since the dawn of civilization, man has tirelessly sought perfection in Eust about every aspect of life. 4othing, however, can ever be truly perfect, and in truth, no system can ever be completely error"free, as we have seen time and again in everything from politics and economics, to medicine and literature. Certainly, any tax collection system, which must deal with, at the very least, hundreds upon thousands of human beings "the taxpayers """ is bound to experience diculties in its implementation, and in its continuing evolution. The Philippine tax collection system, as it stands, is li/ewise far from perfect. (evenue ocials and personnel ac/nowledge that many loopholes in the system still exist, and lea/ages have still not been totally plugged. 4evertheless, the willingness to ac/nowledge one#s shortcomings is perhaps the rst and most important step in ma/ing improvements. $n this light, this (eport aims to serve as an +eye" opener+ to all those who are concerned with the impartial and eective implementation of our tax laws. Though others may believe otherwise, it is often true that the best H and sometimes H the most obEective H criticism can be given by those who are actually a part of the collection system itself, and who ta/e an active part in its day"to"day operations and activities. $n the nal analysis, the amount of taxes paid to, and collected by, any 6overnment shall spell the dierence between a nation#s success or failure in its Fuest for a humane Fuality of life. The late 'ing Iussein ibn Talal of %ordan, in his parting words to his son and heir, !bdulah ibn Iussein, entrusted his dream for the %ordanian people in six simple words that, in many ways, express the dream of all those who are faithful to the ideals of public service* +-btain for them a dignied life.+ $t is in this spirit that the tax collection system should continually evolve in a rapidly changing world, that it may serve as the means through which prosperity and enlightenment may be enEoyed by every citizen of a sovereign nation.
