In our march towards globalization, our government needs to give primal importance to the fixing of the Bureau of Internal Revenue (BIR).

Among the government agencies, the BIR comes first in significance.  The BIR collections amount to between 60 and 70 percent of our national budget.  Without the BIR collections, the whole country will stop.

Unfortunately, however, most Filipinos simply refuse to pay taxes.  Those who do, pay direct to the BIR personnel and not to the BIR.  Only about 13 percent, or 780,000 Filipinos, out of the estimated six million Filipino taxpayers, pay their taxes.

Wage earners constitute most of those who do.  They have no choice.  The BIR deducts the taxes at source during pay days.

We have the lowest tax collection in Asia.  In relation to GNP, we only collect around 14.6 percent compared to 25 percent in most South-East Asian countries, as of 1991.  That ratio, I believe, has not changed significantly at present.

No country in the world can survive much less sustain economic growth under such predicament.  We have one foot in the grave already.

As a consequence, the government has to continuously borrow both from the local banking industry and from foreign lenders to meet the ever growing annual budget deficit.  The estimated local debt amounts to over a trillion pesos while the foreign debt now reaches over US$40 billion, and ballooning.

The government forecasts the 2000 budget deficit at over P100 billion.  The Philippines can only fund this deficit by borrowing, which it has done quite exceedingly well.

As a result, we have one of the highest interest rates in the world to attract monies our government badly needs to sustain itself.

Ironically though, the same high interest rates, which have enabled our government to meet its deficits and survive, have stunted the growth of our local businesses, our economic engine.  It is a double edge sword.

Between the treasury bill (government borrowing) and the local loan to a businessman, the local banks will normally prefer the T-bill.

To aggravate matters, between the local businessmen and the affiliates of the big local banks, the big local banks will prefer their affiliates.  This set-up produces nothing but catastrophe.

In the early stages of any businesses, liquidity has primacy over profit.  In the Philippine scenario, however, the start-ups do not stand a chance in the stock market where funds come cheaper.  Our local businesses have to go to the banks to get seed money to jump start their businesses.  In this arena, nobody beats the Philippine government.

Our businessmen then have to eat fire and swallow swords to attract the banks.  Often, these acts may not even be enough to convince the banks to part away with their monies.  Our poor businessmen have to compete with another equally formidable borrower, the affiliates of the big banks.

Our local executives have to put up with the extremely high premium that banks charge before they will get their money.  These premiums represent the risk that bankers incur by not lending to the government, the more stable borrower, and to their affiliates.  From the start, our businessmen already face greater challenges than the multinationals who enjoy both cheap funds from their stock markets and lower interest rates from their banks.

Our Filipino brethren then have to be three times better just to get even with our foreign competitors.  All because, we have a faulty BIR.

For starters, the government can do these three things to fix BIR.

First, computerize the whole system to strengthen the internal controls in preventing and detecting errors both accidental and otherwise.  Cost should never be a problem here.  In my estimate, the leakage from the BIR system amounts to 50 percent of the amounts declared, or, at the lowest, around P100 billion annually.  I do not think the government needs P100 billion to computerize the system.

Second, implement the new tax law, the Comprehensive Tax Reform Act of 1997, to the hilt.  It is not a perfect law but it has plugged the more common loopholes in our previous tax laws.

Third, mandate legally the inclusion of tax subjects in all university curricula to ensure that all citizens understand the relevance of paying the right taxes, not more or less.  At present, in my survey, only Commerce and Law degrees have tax subjects in their curricula.  Our citizenry possesses a limited awareness on the importance of taxation to our national survival.

Fourth, after implementing the above changes, shoot anybody who corrupts the system and violates the law.  The government should also make the perpetrators pay for the costs of the bullets as they do in China.

If our government fails to implement the needed changes in our BIR, we will never be able to see the light of day when the world businesses merge in globalization.*
 

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