Curbing graft and corruption

Curbing graft and corruption | Home Readers Section Letters to the Editor

In a recent article (click the link above), former Philippine interval revenue commissioner Jose Ong concluded that "contact and discretion are the root causes of graft and corruption". He made the following points, which I wish to share with my readers, for research purposes:

1. "It is most respectfully submitted that greed, given the opportunity for realization, breeds graft and corruption. Greed plus opportunity is the basis of graft and corruption. Absent opportunity, greed and graft and corruption cannot prosper. Greed, if present, let us face it, is very hard to expunge because, as a general rule, it is innate and better left to the realm of the religious and the moral reformists. The opportunities, however, for the realization of greed are most certainly remediable. As the Lord’s Prayer says — “Lead us not into temptation and deliver us from evil.” "

2. "What are the opportunities at the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) that give rise for one’s greed (government functionary and/or the taxpayer) to materialize and prosper?

"It is strongly suggested that it is contact with taxpayers and discretion given to functionaries. Contact with taxpayers gives rise to the opportunity to harass, negotiate, and socialize or fraternize with the taxpayer and thereafter fix a case for material consideration. Discretion gives opportunity for harassment, contact and settlement of a case. Poor Juan dela Cruz gets a measly 10 percent to 20 percent of what is due him and the two who surreptitiously danced the tango get 40 percent to 50 percent each of what justly belongs to Juan dela Cruz. What a pity, insofar as it affects services to the citizens and the fiscal and economic turnaround of the country."

3. "Based on the above premise, we should therefore fashion or design laws and regulations and put in place equipment to minimize contact and discretion. We should lessen investigations and examinations of taxpayers to the minimum. We should abandon our present practice of examining all tax paid income tax returns. We should expand further the coverage of withholding tax. We should be very discreet in issuing Letters of Authority to examine which are perceived as equivalent to cash. We should accurately develop badges of fraud and tax evasion to confine our investigations only to those pinpointed and suspected. We should proceed without letup and with determination in completing computerization to assist in doing away with examination and confining investigation to the necessary minimum. We should fashion the computers so that the leadership would already know the minimum liability of a taxpayer subject to investigation to prevent the examiner to monkey with their findings. We should develop statistics that would provide the high and low in tax liabilities of each particular industry. We should provide complete transparency in investigation and examination procedures. We should set and strictly enforce deadlines for the validity of Letters of Authority to examine and the submission of reports of investigation and the issuance of rulings. Most important of all is clean the revenue Bureau by removing the known corrupt functionaries, including the leadership that covers and consents to their activities. Make sure also that all accountants who prepares and certifies to the income tax returns of their clients are qualified."

4. "Statistically, the tax revenue produced from investigations or examinations is only a picayune of the total revenues collected because as previously mentioned the bulk of it goes to private pockets. It is imperative, therefore, without hesitating about loss in revenue, that we pass tax laws and administrative rules and regulations that lessen, if not entirely remove, contact and discretion on the part of government functionaries. A good example of this is the then income tax provision called the SNITS (Simplified Net Income Tax System) whereby individuals engaged in business and professionals were allowed to remove 40 percent outright from their gross income as deductions and were subjected to tax only on the 60 percent thereof. This is actually taxation based on adjusted gross income, not the pure Gross Income Taxation. The returns filed under this system may not require examination."

5. "The exact reason why this system was eliminated from the tax code by the Comprehensive Tax Reform Act is not clear, probably it is the result of the so-called politics in Tax Reform. Statistically, when the SNITS was in effect as part of the Tax Code, it encouraged many individuals and professionals who have not been paying their correct taxes to voluntarily file and pay more. It has tremendously increased the taxpayer base. The reason is obvious — no contact, no negotiation, no temptation to cheat, nothing to provide for fixing or representation. Moreover, it removed the inconvenience of keeping receipts and documents of payments, and had eliminated the exercise of discretion. Now, we are back to the itemization of deductions and examination, which gives a lot of leeway for negotiations and discretion for not paying the correct amount of tax."

6. "To lessen contact and eliminate discretion and increases tax collection, the SNITS instead of the Pure Gross Income Taxation should be revisited and reenacted as part of the Tax Code and should also cover corporate taxpayers, even on an optional basis. Optional, meaning, if the corporate taxpayer takes the fixed percentage as deduction (realistic rate to be determined) from gross income, tax investigation is waived; on the other hand, if it opts to claim a deduction more than the fixed percentage it must keep and produce all its records and receipts and prepare for a thorough scrutiny and investigation."

7. "The Lateral Attrition Act, and other similar bills being broached about could be a supplement as a deterrent in minimizing graft and corruption but remember that contact and discretion are very much more profitable than what these bills, if passed into law, could offer by way of “carrot as against the stick”. We can also add to this proposal, the creation of a Criminal Tax Court to be more strictly and swiftly responsive to the criminal aspects of Tax violations."

8. "The recent offer of BIR to give a 10 percent reward to tipsters may not also be as palatable considering the long wait for the payment of the reward which will depend on the process of finally collecting the tax. Probable tipsters, because of the long wait, might just go along and dance the tango with the corrupt wherein his gain may be more tempting and realized faster."

9. "Regarding the other major collection agency of the government, the Bureau of Customs, since this is a period of modernization in equipment, in addition to the remedies already mentioned, where applicable, it should, among others, acquire modern x-ray, the contents of 20 or 40 foot container vans without opening them, like in the case of Israel and many other countries. This eliminates contact with inspectors, examiners and other Customs’ officials and facilitates the convenient and fast release of imported goods with the appropriate payment of duties and taxes paid as desired and requested by legitimate importers and businessmen. This can also assist in pinpointing the importations made by smugglers for the imposition of the correct duties and taxes."

10. "To attain success in curbing graft and corruption sincere determination and political will of our highest leadership down to the Bureau Chiefs is of utmost importance and necessity, and must be exercised with unquestionable fairness and impartiality in their dealings with the bureaucracy, absent “Bata-Bata”, “Padrinos” favoritism and vindictiveness, after, of course, eliminating and removing first the corrupt in the agencies."

11. "In conclusion, suffice it to state that contact and discretion are the root causes of graft and corruption, tax evasion and smuggling, which call for urgent and immediate remedies for their elimination or minimization so that government may receive the revenues rightfully due it to make this country financially viable in facing the challenges of this millennium and support and make successful the program of the new administration, “Kung walang corrupt, walang mahirap.” "
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