Speech
of
His Excellency Fidel V. Ramos
President of the Philippines
At the 88th Anniversary of the Bureau of Internal Revenue
[Delivered on August 5, 1992]
Taxes and the
civilized society
I AM PLEASED to be asked to join in your 88th Anniversary of the Bureau of Internal Revenue.
Eighty-eight years is a long time. But growing old by itself is no great achievement—whether in an institution or in an individual. Often enough, many people as they age become good only because they no longer have enough energy to continue being bad. On the other hand, according to Commissioner Jose Ong, the older the BIR gets, the better it becomes, just like vintage wine.
So I have come here not just to greet you on your anniversary but to felicitate all of you—management and rank and file—for having exceeded your revenue targets of June 30, 1992—and to exhort you to even greater efforts.
Key to our economic achievement
Despite the pressure of work, I made sure I got here—because how well the BIR works is of primary importance to the Ramos Administration. We have set ourselves what many people regard as highly ambitious goals over the next six years. We are determined to return our economy to growth—and this means investing in the public infrastructure and services upon which private enterprise can build businesses and generate jobs.
We are just as determined to uplift the masses of our people from their life-long poverty—and this means investing in the health care, housing, schools and skills-training programs that enable individuals to develop to the utmost the potential of their lives.
These twin goals we can achieve—but only if we have the funds to make the correct investments in the right proportion. The main source of public finance is of course the revenue system, of which this Bureau is the biggest part.
How well Government does significantly depends on how well the BIR does. In turn, the quality of the overall tax effort is determined by how well you do your individual and collective jobs—as officials and employees of the Bureau of Internal Revenue.
This is why Finance Secretary Ramon del Rosario, Commissioner Ong and I are determined to do everything humanly possible—perhaps we shall go even beyond that—to raise BIR’s work standards, efficiency and output.
Enormous rate of tax evasion
It is true our tax efficiency has improved substantially over the past few years. But, having said this, we still must admit that, historically, our tax effort still suffers when compared with what other East Asian countries have been achieving.
Over the 17 years between 1972 and 1988, our tax effort averaged about 12 percent of GNP. While improving, this is still well below the record of our neighbors in ASEAN. Malaysia, for instance, collects the equivalent of more than 22 percent. Indonesia collects 17 percent, and Thailand more than 16 percent.
BIR statistics themselves tell us five million Filipinos should be paying taxes—but only two million do. Estimates of annual revenue losses from various means of tax evasion are put at between PI6 billion and P37 billion.
Taken as a whole, our tax structure is still regressive Indirect taxes still account for 65 percent of all taxes—and, as a result, poor and middle-class Filipinos pay in taxes a greater proportion of their income than rich Filipinos do.
Our property taxes, for one, still are positively “prehistoric.” That is how they were described by a shocked Asian Development Bank economist who studied them. And it is true that property taxes make up only 0.7 percent of total tax collections.
We must also hasten to plug the tremendous tax leakage caused by the grant of tax exemptions and privileges to some elements by the abuse of the “infant industry” principle.
Because Government’s spending capacity has not kept up with its increased responsibilities, our inadequate tax effort had led to the reduction of basic social services, to include garbage collection, traffic management, water and power, peace and order and protection of the environment.
What are we going to do?
We obviously cannot allow this situation to continue.
We must find ways to persuade or even compel the non-poor and the more capable to carry a larger share of the burden of community concerns.
Taxes are the price we pay for living in a civilized society.
The individual who cheats on his taxes weakens his Government in its fight against crime, insurgency and other social disorders. In so doing, he undermines not only his own physical and economic welfare but those of his fellow citizens.
I have asked Congress to enact various tax reform measures that have been drawn up in consultation with BIR top management with the Cabinet and congressional leaders. These include procedures for improving tax administration of large taxpayers; reforms in the value-added-tax system, and increased penalties for tax evasion.
We will impose these penalties rigorously—without fear or favor.
In the context of these objectives, we may ask: what makes a taxpayer honest or dishonest?
The answer lies not only in the taxpayer’s sense of patriotism of civic obligation or the lack of it. Part of the answer lies in the quality of the internal revenue service.
If the BIR is managed by men and women of proven competence, dedication and integrity, then I am sure taxpayers will react responsibly and generally be honest in paying their tax obligations.
On the other hand, if those in charge of tax collection are indifferent, apathetic—or worse—easily susceptible to wrongdoing, then one must expect even the normally decent taxpayer to think about making a deal that will reduce his overall tax liability.
Rewarding virtue
The bottom line is that the BIR will succeed in collecting what is legally due the Government only if everyone in the Bureau will do their jobs well and honestly.
I am prepared to reward virtue—as I am fully prepared to punish wrongdoing in the BIR. I have asked Congress for legal authority to reclassify to highly sensitive status BIR and Customs positions.
Let no one underestimate my own determination—my personal commitment—to give our people good and clean government.
Huwag na tayong magsubukan—at ako ay talagang subong-subo sa layuning malinis at mabisang pamamahala.
It has almost become automatic that every time the executive branch proposes to the legislature a new tax measure, Congress throws back to it the issue of taxes uncollected; and of sweetheart deals made between taxpayers with large liabilities and our revenue agencies.
The Government needs to recover its moral authority on this issue—and I will exert political will to regain it.
We know there are many scalawags in the service, including the BIR. We know that some are obsessed with generating revenues from taxpayers not for the Government but for themselves.
We know there are those who violate policies and programs and repeatedly deviate from established systems and procedures.
We know there are those who are engaged in systematic harassment of taxpayers.
We know there are those who make highly arbitrary tax assessments for ulterior motives.
Modernizing tax systems
These abusers and offenders are the elements in your organization who erode the confidence of the public not only in the BIR but in the Government. These are the few who have blackened the reputation of the entire BIR. I have instructed Secretary Del Rosario and Commissioner Ong to take tough action against these offenders.
I want this done now and I want it done fast. I have pledged to both of them my full support, and am prepared to deploy our investigative and prosecution agencies to help in this task.
And if it should be necessary to restructure the organization to make it more efficient, then let us do it—by executive and legislative action as necessary.
Efficiency in collecting taxes is not one-sided. As a former commissioner of the U. S. Internal Revenue Service has wisely observed, taxpayers in exchange deserve a system that “minimizes complexity, uncertainty and administrative burdens.”
An important challenge we face is to modernize our BIRs systems. I understand you have an ongoing modernization program—designed to benefit from the new information technology.
You can count on me to support this modernization program—wholeheartedly and in every way I can. I count on you to be my allies and partners in this work I am determined to accomplish for our country and our people.
Ladies and gentlemen of the Bureau of Internal Revenue, we are faced with the historic opportunity for an economic take-off that has long eluded our nation. Because time is so short, we have higher than normal goals. We need to accomplish programs that must be supported by sufficient revenues. You have it in your hands to help Government achieve those aspirations for our people.
Let us maintain the forward momentum and advance!
Source: Presidential Museum and Library
Ramos, F. V. (1993). To win the future : people empowerment for national development. [Manila] : Friends of Steady Eddie.