Philippines: Bureau of Internal Revenues Receives Support From World Bank For More Efficient And Equitable Tax Administration

Contacts

In Manila: Leonora Aquino-Gonzales (632) 917-3003, lgonzales@worldbank.org

Anissa Tria (632) 917-3013, atria2@worldbank.org  

In Washington: Mohamad Al-Arief (202) 458-5964, malarief@worldbank.org  

 

MANILA, March 14, 2007 – The World Bank's Board of Executive Directors yesterday approved a US$11 million loan to support the Bureau of Internal Revenues' (BIR) program that will improve efficiency of tax administration resulting in increased taxpayer compliance. The National Program Support for Tax Administration Reform (NPSTAR) will improve the registration process, clean-up taxpayer registry; improve taxpayer e-services, e-filing and e-payment, and increase collection of arrears. The loan will also support improvements in governance and management of the BIR. Overall, this assistance will help improve taxpayer compliance, tax enforcement and control, and enhance the BIR’s capacity to undertake a sustainable and long-term reform program.

 

Department of Finance (DoF) Secretary Margarito Teves said, "The improvement in tax administration will help the government generate additional revenues that are needed to increase spending in needed social services such as health and education, and vital infrastructure such as roads and bridges. By plugging the leakages in the tax system, we are also increasing the equity of the tax burden."

 

Revenue administration in the Philippines is characterized by an underlying weak community culture towards paying tax. Government data show that there is a disproportionate collection of income tax between employed and self-employed individuals. The DoF estimates that the difference between actual collected taxes and the potential tax due from self-employed individuals is about 70 percent while the gap for employed individuals is only 7 percent. The National Tax Research Center (NTRC) estimates that almost P30 billion in taxes from the self-employed and professionals were not collected on an annual basis in the last six years.

 

Joachim von Amsberg, World Bank Country Director for the Philippines, says that fiscal reforms undertaken thus far are essential for restoring the health of public finances and reversing the compression of public expenditures for basic public services. "The international development partners at the recent Philippine Development Forum acknowledged Government's plans to increase public investment while meeting the fiscal targets through further increases in the tax effort. We hope that the World Bank support to the BIR will help make tax administration and collection more fair and equitable and allow the funding of more and better public services."

 

BIR Commissioner Jose Mario Buñag said, "The BIR looks forward to fully implementing its tax reform agenda. The Tax Reform Administration Group (TRAG), created last year to spearhead the bureau's reform program, has moved forward on initial reform activities in the areas of registration, filing and payment; taxpayer service, audit, organization and management; legal and enforcement; nationwide rollout of computerized systems; and collection, enforcement and arrears management. At the same time, we are working to communicate the reform program to both internal and external stakeholders."

 

The NPSTAR is part of a comprehensive tax reform support program to BIR which includes additional support from the following development partners: the Millennium Challenge Corporation (MCC), the United States Agency for International Development (USAID), the Australian Agency for International Development (AusAID), and the Swedish International Development Agency (SIDA). The International Monetary Fund (IMF) provides advisory service throughout the project duration.