The issue I am raising is bigger than PDAF. It’s about the corruption in the BIR. Indeed, corruption through PDAF is just the tip of the iceberg. I would like to share how corruption works at the BIR. I want everybody to understand and feel its gravity to our life. This is bigger than PDAF because the accumulated amount is enormous. Continuous pain is worst than short time severe pain.
Voluntary payments, withholding taxes, and investigation of taxpayers—these are the ways of collecting taxes by the BIR. An example of voluntary payment is the filing of an annual income tax return. This is the one we rush to pay every April 15. Withholding tax on compensation—deducted by the employers from the employees together with the pag-ibig, sss, and other deductions monthly—is an example of a withholding tax. The case of Manny Pacquiao is an example of audit of taxpayer. Corruption transpires during the investigation of businesses by the revenue officers. Examiners, supervisors (assessment section), assistant RDO, Revenue District Officers (RDO), Directors, and some commissioners—these are the specific revenue officers involved to the scheme. No examiners, supervisors, RDOs, & Directors can claim that he was never been involved in this scheme. Is there any policeman who has never touched a gun? Is there any fisherman who has never tasted the fresh or sea water? Every year the BIR conducts tax examinations to most business establishments. Initially, the BIR issues letter of investigation. Letter of Authority (L.A.), Tax Verification Notice (T.V.N.), and Letter Notice (L.N.)—these are the letter of investigations issued by the BIR, although the L.N. is not actually used for thorough investigation. The LA is used for regular audit. The TVN is used when LA is inappropriate. This includes closure of small businesses. Another used of TVN is when transferring the ownership of real property by inheritance. The LN is used for some circumstances. When the BIR found a discrepancy between the information submitted by a taxpayer and the information gathered by the BIR from another taxpayer outside the formal audit, an LN is issued. This happens usually between a distributor and a whole seller. Both of them submit information to the BIR. Considering their relationship, the former being the buyer and the latter being the seller, the information are compared based on the records submitted to the BIR. Any discrepancy will lead to the issuance of LN. As a consequence, the taxpayer can pay the tax if he agrees; otherwise, he can explain why such discrepancy occurred. The main source of corruption is the LA because this is the normal way of authorizing the audit. In the eyes of the revenue officers, LA means money. With LA, revenue officers are like stockholders of every corporation. In some case, when a revenue officer received a LA, he is already borrowing money for casino because he is sure that on or before 120 days he has money, specifically from that LA. LA is like a certificate of deposit. It’s like a check. It smells money. It’s money. Revenue Officers call it “the bread and butter”.
Examiners and group supervisors quarrel for LA. Each lobbies, some even make advance payment to their RDO just to get the taxpayer they desire to audit.
The LA is assigned to the examiners with a group supervisor. An examiner can have several LA at the same time, more or less ten (10) LAs per examiner depending on the number of examiners in a district. A group supervisor can have more than one group of examiners. The transaction is straightforward and simple. The audit is conducted by the examiners. The findings are presented to the taxpayers, often with the supervisor. The taxpayer arrange schedule with the supervisors to discuss the settlement which includes the amount to be shown on the receipt and the amount that goes for the boys—the bribe money. The supervisor discusses the settlement with the RDO. If approved, the payment form is prepared signed by the RDO and the taxpayer pays with the bank. The taxpayer returns to the supervisor and with him are the payment form and the money for the boys. In some cases the taxpayer just gives the whole amount to the examiner or supervisor and let them pay with the bank. The revenue officer will just send the original copy of the payment form to the taxpayer after payment with the bank The supervisor divides the money among himself, the examiners, and the RDO. The RDO divides the money given to him by the supervisor. He gives to the assistant RDO and to the Director. And finally, the Director distributes the money to the commissioners of his choice. These are the common scenarios that you would see almost every day at the BIR. There are some districts where the supervisor reports the money to the assistant RDO. The reason why the usual distribution of money is from the supervisor to the RDO and not to the assistant is because of “Bukol”. This is a common word inside the BIR. It refers to the amount of money not reported by one to another. At first, I cannot believe what I see. I know it’s illegal but I wonder if it’s illegal why it’s happening plainly and nobody seems to care. Regardless of age—from the youngest revenue officers to the retirees
—everyone is engaged in the scheme. I see even those appearing to be religious individuals involved in the scheme. They conduct masses at the office as they involved themselves to this detestable scheme of corruption. It’s very mind twisting. I don’t know how the president could say “tuwid na daan” as this is happening. If he only knows, maybe, he will not say these words. It’s confusing. An ordinary Filipino hears different thing from his president compared to what he sees. But the main issue here is that no one can prove it except through entrapment. Currently, unless you entrap a revenue officer you won’t prove it. There are no audit trails. How can anyone prove it? Money transfers from one hand to another in seconds. Transactions occur anytime and anywhere. It happens inside the BIR office. It happens at the lobby. Transactions take place at the revenue officers’ car. It happens at the restaurant near the BIR offices. Anywhere the transactions transpire. That’s why I think the only way to address this issue is to pass a law requiring all personnel in that position to be subjected to regular audit of their bank accounts and regularly conduct lifestyle check. It must be on regular basis and not just on random or especial occasions. The government’s loss from this scheme is tremendous. There are about more or less 2,000 examiners including supervisors across the country. If each gets P1,000,000 each month, in a year the total loss of the government must be P24,000,000,000.00. This is every year. It happens every year. But, be noted that, that’s not the actual loss by the government. That’s just the portion of the total amount of tax that must be collected for the government. The amount is just those got by the examiners and supervisors. Remember the taxpayers settle with the revenue officers. Why? It’s because in exchange for something. It’s not surprising that majority of the taxpayers intentionally don’t pay the correct taxes simply because of our environment. Let’s take for instance the case of the contractors, particularly, the government contractors. There are expenses that cannot be deducted from the gross income. That’s bad for the business because it leads to overpayment of taxes. An example of this expense is the kickbacks. It’s a common knowledge that most government projects have kickbacks. The contractor cannot deduct this resulting to higher taxes. Another problem of the contractors is that they cannot transact with the government unless they have tax clearance. One of the requirements for the clearance is that a taxpayer must not have a pending case with the BIR. Arbitrary assessment or not is still an assessment. The taxpayer must prove it wrong first before it can be taken aside. If a taxpayer refused an offer of the revenue officers for settlement, they will issue an assessment. Regardless whether it’s valid or not the taxpayer is obliged to deal with it first before he can secure a clearance. Consequently, the taxpayer needs to secure the services of a lawyer. That means additional expenses. The damage is not only money but time also. It is; therefore, wise for a contractor to under declare transactions either by decreasing his gross income or increasing his expenses or both. A 50% or more under declaration is not surprising. This makes businessmen feel safe. When the BIR comes, they settle for the 50% to 75% of the under declaration. If you are the businessmen, why file your taxes correctly? You will just put yourself in trouble. This has became the attitude of the taxpayers towards taxation.
Let’s set an example. If the total amount of tax to be paid is P100.00, the taxpayer will declare P60.00 resulting under payment of tax amounting to P40.00. The examiners will settle for P20.00 and out of this P10.00 goes to the government and the other P10.00 goes to the revenue officers. The amount shown at the beginning amounting to 24B, in the example above represents the P10.00 stolen by the revenue officers. Can you imagine how much is the actual loss of the government? That P10.00 represents 25% of the total loss by the government. The 100% must be P96B. But not yet, it was just based on the amount stolen by the examiners and supervisors. How about the amount that goes to the assistant RDO, RDO, assistant Director, Director, and some commissioners? The amount taken by these officers were not yet included to the above computation. At least you have the idea of how serious this problem is. If the government could just collect properly these amounts, is there a need to impose a VAT on gasoline and in electricity?
The salary of Revenue Officer I, including the examiners, is just about P13,000.00 gross of deductions but look around the BIR offices and notice the brand new cars parking on the parking space. Who owns it? How an examiner with such salary is capable of buying this kind of cars? The BIR says, “Run after the tax evaders” but the real tax evaders are inside the BIR. All revenues whatever the source—legal or illegal—is subject to tax. How much the revenue officers have declared to their income tax return compared to their bank accounts and properties? They are the root of tax evasion. They teach the taxpayers to evade taxes. More often than not, the issuance of LA is just for formality only. Beforehand, the agreement is already arranged. A taxpayer is informed in advance that a LA will be issued and the amount of settlement is already arranged. Recently, the BIR goes with the big issues. When the case on the chief justice broke out, there’s the BIR. When the PDAF scandal broke out there’s the BIR. There’s also the case of Manny Pacquiao. That’s the magic trick—leading the eyes of the audiences to one direction using one hand as the other hand performs the trick. It’s okay to ride with these issues, after all there’s a legal and factual basis, but it must be assured that the real issue are being addressed and that’s the corruption at the BIR.