Surgical not cosmetic measures
The Philippine Star
09/01/2003

The Arroyo administration has been at a loss on how to reverse the declining trend in revenue collection. It cajoled the bureaucracy and even bowed down to its pressure and replaced reform-minded officials without much success. Now, it is employing the stick approach – the controversial lifestyle check.

Lifestyle probes serve their purpose, which is to expose officials who abuse their position and enrich themselves in office. Overdoing it, though, has its downside as experienced a couple of weeks ago when Customs Commissioner Antonio Bernardo and four of his deputies tendered their courtesy resignations in protest of sweeping accusations implied by data released by the Malacañang-based Transparency Group.

However, it seems that even if the government pins down 10 or even 50 crooks in BIR and Customs, it would not really solve this year’s deficit problem or achieve a dramatic turnaround in collection levels.

Deep incision not mere cosmetics

Lifestyle checks coupled with cajoling the bureaucracy is good media copy, but unfortunately is merely cosmetics. The only genuine solution to the country’s revenue problems is to restructure the two biggest income-generating agencies that have been bedrocks of corruption.

The BIR collects more than 70 percent of the government’s annual income and the Customs account for nearly 20 percent. At least P100 billion is reportedly lost every year to corruption in revenue collection agencies. And both the BIR and Customs were tagged as the two most corrupt agencies in the country, according to a poll conducted by the Social Weather Stations early this year.

For such a deeply rooted problem, the solution should be something surgical, one that would dig into the bowels of the malady and purge the entire system to give birth to a new one. At this point, the only solution that would come close to being surgical is the legislation of the much-debated National Revenue Authority (NRA).

Cut loose from politicians

The NRA is the compromise version of the proposed National Administration Revenue Authority (NARA), which in turn was the offshoot of the Internal Revenue Management Authority (IRMA), a brainchild of former BIR Commissioner Rene Bañez.

Former BIR Commissioner Rene Bañez resigned a year ago after BIR employees loudly protested his reorganization plans to spur increased government revenue collections at the BIR. Bañez claimed that his initiated reforms were stonewalled by a bureaucracy that fiercely resisted changes.

Because IRMA was so radical, the government decided to repackage it. Happily, the intention and rationale remains largely the same, which is to cut the destructive cord that binds the BIR with politicians and lawmakers and make it a truly independent revenue agency.

Business model for tax collection

For such a model to approximate success, the BIR must function like a typical corporation, a private company that constantly worries about the bottom line and profitability.

This is achieved by appointing an internal revenue board comprised of government ex-officio members and private sector representatives. The board would select a chief executive officer out of three nominees submitted by a search committee created by the board.

The CEO will have to secure board approval for a performance-based management system that would govern the selection, hiring, appointment, transfer or dismissal of all personnel.

The transition provision embodied in Section 20 of NRA is the key to overhauling the system because it would allow the government to start from scratch, hire personnel who are qualified and credible, and implement a carrot-and-stick formula that penalizes non-performers and rewards the good guys.

Painful but essential

The problem with surgical solutions is that it is so hard to espouse, much more implement because it upsets the status quo and those who benefit from it.

It now appears that a compromise bill is about to come out from the Congress committee level calling for the removal of the controversial Section 20 providing NRA with the scope to overhaul the bureaucracy and therefore force 12,000 people out of jobs.

Expect more debate on this. Understandably, politicians will not want to be blamed for massive loss of jobs. Purists, of course, believe that a compromise would defeat the entire purpose of creating the NRA.

Whatever the final form of Section 20, the NRA is still worthwhile to pursue as its other features, like the performance-based management system, may eventually rid the revenue agency of corruption and inefficiency.

The changes proposed in the NRA bill are painful and bitter prescriptions. They are radical and surgical in nature and definitely not just cosmetic surgery.

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