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PA 231 Public Fiscal Administration

Revenue Administration Case Study

In Partial Fulfillment of the subject


PA 231 (Public Fiscal Administration)

Case Study:
Revenue Administration

Submitted to:
Prof. Antonio Faunillan Jr., CPA
Instructor

Submitted by:
Glenne B. Lagura
MPA-student

University of Southeastern Philippines


College of Governance, Business and Economics

February 11, 2012

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PA 231 Public Fiscal Administration

Revenue Administration Case Study

CASE 1:
If you were to advise the Chief Executive, what advice would you give to

go about t he institutional change in BIR?

Establishing institutional change in BIR is indeed a need to address for the ideal
strengthening of tax collection and implementation in order to achieve the acceptable level of tax
collection efficiency as intended by His Excellency Benigno P-NOY Aquino III. Such acquisition of
institutional change would mean a lot to stop the EVAT-increase trap where P-NOY fought hard for
its realization.
But reality check, the means of acquiring the ultimate goal talks a lot. Occurrences of
changes to achieve improvements of existing policies without challenging the existing development
paradigms must be logically observe. Prior to commit changes, identification of the core problem
must be given emphasis; and such identification should start from the house of the countrys top
revenue collecting agency - BIR.
Preventing corruption before it happens is closer to raising tax collection efficiency than
going after tax evaders. In actuality the aforementioned statement would be a sort of
recommendation that I could present to the Chief Executive.

Enumerate the general steps/phases you intend for the government to


implement.
Below are the steps/ phases I intend for the government to implement in conducting
institutional change in BIR:
1. Define the core problems of BIR; it may involve assessing the internal lapses and
loopholes of the house which occur during the previous year and straightly address the
issues of graft and corruption.
Cutting the fruits of the tree which said to be useless is better, but the best way
to avoid iteration is by pulling away the roots which causes the tree to bear bad
fruits.
2. Analyze the characteristics of the resources that create problems in the agency. It may
involve the following actions:
Consider options for improving governance of these resources.
Let us accept the fact that tax collection efficiency will not come with the
appointment of one good, competent BIR commissioner. It is now time to attract the
best and the brightest Pinoys to the tax collection pursuits of P-Noy. Further, as an
institution, BIR must be able to attract, develop, and retain highly competent BIR
examiners at the same time the agency must be able to resist the influence of those
out to prevent the impartial, fair collection of taxes.
Define the institutional demands associated with various interventions.
To achieve institutional reforms, it must consider freeing the BIR from the
clutches of the Salary Standardization Law. We have exempted the Bangko Sentral
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PA 231 Public Fiscal Administration

Revenue Administration Case Study

ng Pilipinas and some government-owned and -controlled corporations from that


wage restriction; the BIR deserves no less.
Which intervention can be successfully accomplished without embarking on
institutional change?
The BIR, as an institution, must cease to be perceived as being used by those
in power to favor those who are on their side of the fence, and keep at bay those who
are on the opposite side.
Which interventions would require collective decisions, community regulation
and enforcement?
Accomplishing institutional reforms within the BIR without a legislative
agenda is not possible thus; a law must be passed to have the BIR exempted from
the Salary Standardization Law.
Giving a degree of independence to the BIR to enforce tax laws without fear
nor favor may require institutional changes that can only be done through the
enactment of a law.
3. Scrutinize the agencys capacity for cooperative action.
Collaborative effort must strongly establish between the local government unit
and the national government in strictly implementing tax collection since LGU is
considered to be the direct bridge to keep in touch with the revenue centers. By this,
it would be easy to determined and perform necessary actions to those individuals
and businesses which are considered as tax evaders.
4. Analyze the result of the existing policies to the public and reflect on the working system
if it promotes or hinders sustainable usage of the resources. Investigate whether any
institutional changes will require the concurrence of some higher level of government and
assess how the agency will likely acquire cooperation at that level.
Achieving organizational development is not sustainable if BIR will focus only
to its inclusive advancement. It will always be an accompaniment of different
sectors/ agency at the same time abiding to what is said to be the law. Deeper
understanding of the existing system with an evaluation of it would serve as a
benchmarking model that will lead to a better decision making.
5. Out of the information and results that can obtained from the abovementioned steps,
identify the 'best option for improving: resource governance and the institutional
adjustments that will be needed. Focus on those which are likely to have the greatest
impact at a level of collective action that will not strain the capacity of the agency.
6. Plan a strategy for implementing the project /programs that include not only technical
interventions such as trainings or seminars and usage of technological advancements but
also a study of how any needed institutional changes, such as the establishment of new
rules (at the constitutional, collective decision-making or operational level), will be carried
out. Begin implementing the rules changes.
7. Monitor the changes, assess the impact and revise institutional arrangements as
necessary.

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PA 231 Public Fiscal Administration

Revenue Administration Case Study

CASE 2:
If you were t o advise the Commissioner of BIR, what procedure/process
would you propose in order t o address the tax collection problem in small
scale-informal businesses (commonly known as grey economy)?

1. Improvise the manner of taxing.

Standardization in taxing the small scale-informal businesses must be


categorized. How small is small and in what scenario big is considered as big? What
are the bases of taxing?
Me myself, I am pro in imposing taxes those who are engage in tiangge
vending. Everyone is paying their own tax, whether it is direct or indirect, thus
everyone who performs regular activity in selling items must be a subject in taxing.
But to give due fairness to everyone, owners of tiangge must be subjected to
tax in accordance to what is supposed to be. There are bases that can be considered:
it could be due to the prices or type of the product being sold, by the range of the
average income daily or how small/big the entire space wherein the business is
situated, etc.
It is now the will of the official to address issues with regards to it because in
the end of this circumstance equity in taxing will rise as the core issue.

2. Coordinate with local officials and other agency in determining recognized places, stall or store
that engages in small scale business.

Most of the businesses that exhibit small scale business are renting the space
where they occupied their business. Managing the list of those primary lessees would
serve as an assist in determining who are entitled to be taxed as small scale business
and avoiding losses of revenue.

3. Proper collection of the entitled tax.


Collection of said taxes must be scheduled properly in accordance also of
employing collectors whom can be considered as trust-worthy. Regular reports of the
current status of the businesses must be updated always and reports must be
scrutinize accurately to detect any falsify documents.

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PA 231 Public Fiscal Administration

Revenue Administration Case Study

Is the above regulation enough to implement the payment of taxes of


tiangge retailers?

In my own point of view, the above scheme being employed by the Bureau is not good
enough in terms of its specifications and further details especially in justification of
imposing a certain amount of tax. Though part of the policy did a great help in plugging
revenues leaks and tapping additional revenue sources, occurrences of the issues of
considerations and clarifications exist.
Comprehensive schedules of collecting taxes as well as the manner of collecting and
imposing such are issues to be faced on. Detailed bases of the amount of the tax to
impose as well as criteria of it which may include the range of the average income or
maybe evaluating the items being sold are the instances which I think they can consider.
Revisiting of the existing policy would be a great help for the advancement of the
system just to uphold also an unambiguous concept of imposing and collecting tax.

Sources of additional information:


http://www.fao.org/docrep/w7483e/w7483e08.htm

http://ideas.repec.org/p/wpa/wuwpeh/9412001.html
http://www.bir.gov.ph/updates/features.htm
Revenue Regulation No. 16-2003 BIR
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PA 231 Public Fiscal Administration

Revenue Administration Case Study

Situation:

REVENUE ADMINSTRATION CASE STUDY


CASE I
According to an article from Sunstar, the efforts of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) to
run after and file cases against errant taxpayers is a welcome start to boost the country's revenue collection, however, Senator
Francis Escudero expressed that what he wants to see is that this move coupled with institutional changes to effect real
collection.
The BIR and BOC announced this week that they will file cases against tax evaders and smugglers every week.
Escudero said this move should be done side by side with real and actual collection of revenues. Otherwise, the good start
might just be consigned as a "cosmetic collection."
"Institutional changes should be made because this will enable them to really collect. Note that it will still take some time before
the cases are won in court, that is assuming they will win," Escudero said.
He said the BOC and BIR should review and reassess the current practice of how collection is performed.
"The BIR, in its own study, says 35 percent of potential revenues are lost due to collection loopholes. Thus, plugging collection
loopholes in itself can already raise billions of added revenues," Escudero said.
He added that in improving collection efficiency, the country's top revenue collecting agencies should start cleaning its "house"
and address the issue of graft and corruption squarely.
Escudero said once these lagging areas in revenue collection are connected, real and actual collection will really take place.
"Then we could translate this to better access to social services like education and health, the ability to fund infrastructure and
disaster preparedness," he said.

Guide Questions:
How do we go about the institutional change? Enumerate the general steps/ phases you would make if you were to
advise the President.

CASE II
The 'tiangge' is the Philippine version of the American thrift shop and flea market, but whereas items sold at thrift stores
and flea markets are those that have seen better days (vintage, in the language of fashionistas), items sold at tiangges
are generally or presumed to be brand-new. More importantly, they are supposed to be imported and branded,
qualities that appeal to our colonial mentality.
Thus, if youre passionate about trademark and copyright issues, you might not enjoy the tiangge experience as much;
however, for bargain-hunters and retailers alike who dont care about those legal issues, tiangges with their low, low
prices and brisk sales are truly a retail nirvana.
There would be occasional complaints against tiangges, of course, the most prevalent of which is the non-issuance of
receipts for purchases. All businessesand tiangges are no exceptionare required by law to issue sales invoices or
official receipts. Tiangge retailers that dont issue invoices or receipts are presumed to be either under declaring their
taxable sales or are unregistered with the BIR.
You shouldnt patronize tiangge stores that dont issue sales invoices or receipts. The Sunday School reason: Thou shalt
not abet tax evaders! The practical reason: It is difficult, if not altogether impossible, to get replacements for defective
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PA 231 Public Fiscal Administration

Revenue Administration Case Study

purchases from them if you cant offer proof of purchase.


Its a fact that most tiangge storesalso called privilege stores in tax parlanceare seasonal and therefore dont
bother to register with the BIR. Thus, to plug revenue leakages and generate an additional revenue source, the BIR
issued Revenue Regulation No. 16-2003 (as amended by RR No. 24-2003). This regulation requires tiangge retailers or
privilege store operators to pay advance percentage taxes in the amount of P50 to P150 per day, depending on the
location of the tiangge. However, this amount is to be paid not to the tiangge organizer but to the BIRs authorized agent
bank or revenue collection officer.
All tiangge organizers are required by law to issue receipts for rents paid, advance or otherwise. If an organizer refuses
to issue a receipt, the retailer should report the matter to the BIR immediately.
It is, in fact, only after the lease for the tiangge space is agreed upon that both parties become duty bound to perform
their respective obligations. This means that with a lease agreement, the tiangge organizer is obliged, among other
things, to provide reliable electricity with backup power; allocate acceptable space suited to the nature of the retailers
goods; and maintain the facilities in the same condition as when the retailer first agreed to the lease. In turn, the retailer
is obliged to, among other things specified in the lease agreement, pay rent and show up during the scheduled event
dates.
(Excerpts of this case are taken from the Internet)
GUIDE QUESTIONS
If you were to advise the Commissioner of BIR, what procedure/ process would you propose in order to address the
tax collection problem in small scale-informal businesses (commonly known as grey economy)? Is the above cited
Regulation enough to implement the payment of taxes of tiangge retailers?

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