Attrition rules’ release puts more pressure on BIR, BoC

BY KARL LESTER M. YAP, BusinessWorld Reporter Revenue agencies have been put under more pressure to meet collection targets this year as the implementing rules and regulations (IRR) of the Attrition Law were released on Tuesday. "An official or employee of the bureau may be separated or removed from the service by the final decision of the Board, upon the recommendation of the commissioner, when the revenue collection performance of such official or employee falls short of the target by at least 7.5%...," Section 18 of the IRR of the Attrition Act of 2005 states. Rewards, on the other hand, will be given to officials and districts who exceed their targets. Districts who have top targets are entitled to rewards and incentives amounting to 10% of the excess funds collected, while rewards, both monetary and nonmonetary, may also be given to officials and employees assigned to those districts. The lateral attrition law was designed to measure the performance of tax officials. It gives incentives to officials who outperform their targets and it also penalizes those who underperform. RECKONING NEXT YEAR Republic Act 9335, which was signed into law in 2005, took effect in January this year and officials can expect to be judged next year based on this year’s performance. It is a "companion" bill to the value-added tax and the "sin" tax laws which are among the tax reforms implemented by the government to improve revenue collections as part of its fiscal reform agenda. The government aims to lower the budget deficit to P125 billion this year from P146.5 billion last year. Analysts welcomed the announcement and said the law, if properly implemented, will go a long way in reforming the tax collection agencies which have long been accused of rampant graft and corruption. "This IRR will give more pressure to the revenue generating agencies to deliver to further sustain the shrinking fiscal gap," said Jonathan L. Ravelas, Banco de Oro market strategist. The law, in particular, covers officials and employees of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BoC) who have revenue collection targets, including district heads, assistant heads, revenue district officers and their assistants, supervisors, and revenue officers. It also includes all personnel directly involved in assessment and audit functions. PERFORMANCE TARGETS Finance Secretary Margarito B.. Teves earlier said the Finance department, tax and customs bureaus would mutually agree on performance targets. For this year, the BIR is tasked to raise P675.4 billion while the BoC is expected to generate P197.6 billion. For next year, the BIR’s target may be raised to P793.3 billion and the BoC’s to P231.1 billion, although discussions are still ongoing. BIR and BoC officials were not immediately available for comment on the implementing regulations’ release. The BIR and BoC, the government’s main revenue agencies, both failed to meet collection targets in April. A substantial cut in expenditures, however, offset the dismal performance and allowed the government to report a hefty P17.6-billion budget surplus for the month. The BIR fell P7.2 billion or 9% short of the target P78.6 billion. April was supposed to be the strongest collection month because of the yearly income tax deadline. The BoC also fell short of expectations, reporting a P16.3-billion collection, or lower than the P16.5-billion target. Mr. Teves has rejected calls by the BIR and BoC to reduce their targets for the year, which he called "realistic and attainable." Any change, he said, will only involve reallocated targets such that the combined total, P872.4 billion, remains the same. CALLS FOR CHANGES BIR Commissioner Jose Mario C. Buñag wants the target cut by P6.39 billion "in the spirit of fairness and equity." He said only P3 billion could be collected from the imposition of the value-added tax or VAT on petroleum instead of the assigned P7.36-billion goal. Mr. Buñag also argued that BIR collections would be reduced by P2.03 billion more than the previous estimate for foregone revenues from "mitigating measures." These measures, which include the lowering of excise taxes on petroleum, were designed to cushion the impact on consumer prices of the imposition of VAT on oil effective November. Customs Commissioner Napoleon L. Morales also wants his target brought back to the original P192 billion. When the Customs goal was hiked to P197 billion to account for non-cash revenues, the dollar was still assumed to trade at P56, he argued. The government has since assumed the exchange rate at P51 to P53 to a dollar. A weaker dollar lowers the peso value of imports, reducing duties and taxes as well. Mr. Morales also argued that more than P5 billion would be foregone in the next six months if oil import tariffs are scrapped to ease pump prices. PROCEDURE Under the Attrition law’s IRR, meanwhile, the BIR and the BoC are required to submit to the Development Budget Coordination Committee the distribution of their revenue targets among their districts. Each agency will also submit to their board the distribution of collection targets among its officials and employees. Each tax bureau will have a revenue performance evaluation board who will judge the performance of tax officials. It will be composed of the Finance Secretary, the Director General of the National Economic and Development Authority, and the Budget Secretary. It will also include as nonvoting members the commissioners of the BIR and the BoC, two representatives of the rank and file employees and a representative from the officials, all of who will be nominated by their respective organizations.-Report from BusinessWorld