The tax men share their 'loot'

(Second of three parts)

The personnel of the Bureau of Internal Revenue (BIR) have an interesting term for the amount of money that goes to the government whenever tax audits are done: "RP," for Republic of the Philippines, of course.

But they also have a special term for the remainder of the funds collected: "PR," or public relations, which in most cases far surpasses the RP.

The business taxpayers who give the PR would rather call it by other names -- "nuisance fee" or "foot" or "coffee" money. For all these colorful euphemisms, PR is really nothing more than a bribe that enriches corrupt BIR personnel and deprives the government of needed revenue.

If the purchases made by some BIR personnel are to be any indication, the amounts involved are nothing to scoff at. A retired examiner, for instance, recalls attending the wake of a departed fellow examiner and seeing the latter's stately dwelling for the first time.

He says he could only wonder how the person could have amassed so much wealth in his lifetime on a paltry government salary, which for an examiner at the bureau comes to anywhere between P9,121 and P14,538 a month, depending on his rank.

In an August 1999 letter to then BIR Commissioner Beethoven Rualo, retired senior examiner-turned-anti-corruption crusader Socrates Aguinaldo wrote of a regional director "who has been alternately displaying his (three) brand-new cars: a Honda Civic, a RAV 4, and a Mitsubishi." All these vehicles cost more than P500,000 each. A regional director's monthly salary is only P19,499.

Aguinaldo says another regional director at least suffered a fit of generosity and spent hundreds of thousands of pesos of "her own personal funds" to renovate her district office.

Obviously, the examiner who does the actual audit on a taxpayer is not the only one who gets to enjoy a ride on the PR gravy train. While he is the first BIR officer to get a hold of the money, he is often not the last to put his hands on it. Insiders say other examiners partake of the pot, as does their immediate superior. This boss in turn will set aside a substantial share for the powers-that-be at the national office.

A ranking BIR official says he would be a hypocrite to deny the existence of the sharing scheme inside the agency, but categorically denies that any one of them ever gets a share of the PR money. A retired BIR official, however, attests that the money indeed goes as far as the top levels in the bureau.

Other insiders also say that the "sharing" usually happens once a week, or whenever a tax case is closed or an audit has been purportedly finished. They add that even secretaries and clerks get a portion of the PR in the form of a weekly allowance from their superiors.

A tax fraud division senior examiner describes the way the sharing system works, at least in his territory: A taxpayer whose liabilities have been fixed will usually send someone to bring the PR to whichever examiner is auditing his case. The examiner will then either bring the whole amount to the head of the division or immediately deduct his or her share.

According to the tax fraud examiner, 30 percent goes to the examiners of the group assigned to audit a taxpayer while the supervisor's share is 15 percent. The division chief and the assistant chief each get 20 percent.

The rest of the PR goes to higher officials such as the commissioner, the assistant commissioner, and deputy commissioner in charge of the group doing the assessment.

Sometimes, other BIR personnel say, the examiner and the taxpayer may choose to meet outside the office, such as at a restaurant or a hotel. But wherever the PR is handed over, it is always in cash.

One insider says the scheme cuts across all regions. But he says the proportion of the cuts each officer gets varies and depends heavily on what the "jefe" or chief thinks is "best" for everyone.

Aguinaldo, who spent more than three decades at the BIR before he finally retired in June 1994, says the sharing scheme used to be either 50-50 or 60-40 in favor of the revenue district officers (RDOs) and regional directors.

But that is no longer the case, he says. In a November 1998 letter to his fellow revenue officers still in the bureau, Aguinaldo said this "revenue regulation" governing the sharing system in BIR has been "amended."

He wrote that the proportions were now 70-30. "Under the 70-30 scheme," said Aguinaldo, "30 percent goes to the regional director, 30 percent to the revenue district officers, 10 percent to the chief of the assessment division of the regional office, and the remaining 30 percent to the supervisor and his examiners."

Aguinaldo also used this example to illustrate just how much those involved in such a sharing scheme could be hauling home: assume that one region has five revenue districts, each with 40 examiners. Assume also that each of these 200 examiners gets a PR take of P200,000 a month. This means in that region, the total monthly PR would be P40 million. Following the 70-30 sharing system, the loot would be distributed thus:

* Regional director: 30 percent or P12 million.

* Revenue district officers: 30 percent or P12 million.

* Chief, assessment: 10 percent or P4 million,

* Supervisors/examiners: 30 percent or P12 million.

Actually, say BIR insiders, the PR "sharing" is supposed to go only as high as the regional directors. After all, when it comes to who does some work on tax assessment reports, the directors are as far as the papers go. They approve the reports that also pass through the district officers.

Still, these regional directors give money to their bosses at the national office anyway, if only to secure their positions from which they could be booted out any time or transferred to a less "lucrative" jurisdiction. This is why regional directors give to their superiors at the national office not only after the completion of tax audits, but also during impending revamps, say BIR personnel.

The tax fraud division examiner also says that regional directors lobby for the retention of their posts or for promotion to higher positions by making "representations" with the appointing committee, which includes the BIR Commissioner. Asked what "representation" means, the examiner replies, "bribe money." He also says that the standard "representation" is P5 million.

"Of course, magpa-papapel sila, otherwise aalisin sila (they will try to ingratiate themselves, otherwise they will lose their jobs)," says the tax fraud examiner, who also admits, "I am a party to (the crime). I give (a share of the PR money) to them."

A former BIR top official confirms this. In fact, when this writer spoke to him again recently, the official disclosed that he had just received a call from a regional director in Mindanao who, in the course of their conversion, admitted to just having given money to a bigwig at the national office.

There are, however, times when the PR is not shared. A senior examiner at the BIR national office says these are when the taxpayer selected for audit happens to be a friend or relative of someone with powerful political connections. Appeals are then made to a high official at the bureau. According to the examiner, the PR will go directly to the official who was approached.

"Hindi na 'yan mai-didistribute sa baba (Those below don't get a share)," he says. What do reach those in the lower levels are instructions on how to handle the audit, he adds, explaining that the investigating unit responsible for the audit would perhaps be told to prepare papers that would make it appear that the concerned taxpayer has only so much deficiencies to settle.

The BIR's brand of PR has become so popular especially among the agency's officials that some of them have been known to cling to their posts even after reaching the compulsory retirement age of 65.

In yet another letter, this time to Sixto Esquivias, BIR deputy commissioner for the Legal Enforcement Group, Aguinaldo cited the "proliferation of highly questionable extension of services of BIR officials beyond the mandatory age of retirement."

Writing in 1997, Aguinaldo pointed to the case of lawyer Delano Valera, director of Revenue Region 2 (CAR), whose services were extended for a period of six months beyond his 65th birthday, March 4, 1999. The extension order was covered in a CSC (Civil Service Commission) Resolution No. 983145 dated Dec. 17, 1998.

Citing two more cases involving other BIR officials who were similarly favored by the CSC upon the recommendation of Rualo, Aguinaldo asked, being presidential appointees, "would not the approval of their services' extension upon the recommendation of Commissioner Rualo constitute a usurpation of authority, as the power to appoint rests solely (in) the President?"

A July 19, 1999 memorandum to the Presidential Management Staff (PMS) that was written by Charito Elegir of the Presidential Personnel Group Secretariat (PPGS) in fact says that "only the President can approve/authorize the extension of services of presidential appointees upon the recommendation of the department secretary."

The PPGS, which processes recommendations for presidential appointments, had found that CSC was also processing and approving requests for extension of services of officials, including presidential appointees, who had reached their compulsory retirement age. It cited as a concrete case the same CSC resolution mentioned by Aguinaldo in his letter to Esquivias. Put another way, the answer to Aguinaldo's query is "yes."

Another government agency, meanwhile, also found itself worrying about the goings-on at the BIR. A former undersecretary at the Department of Finance says that some months ago, then Finance Secretary Edgardo Espiritu had been "very angry" over the high number of Letters of Authority (LAs) being issued by the BIR. LAs are needed before any tax audit -- which are done only on taxpayers that meet very specific criteria -- can take place.

The ex-finance undersecretary recalls that Espiritu was upset because "he saw so many letters of authority (being) issued." He says the Secretary wanted the BIR to tell him just how many cases "had actually been brought to court, and how much had been collected from assessed investigations of tax liabilities."

The former undersecretary claims that the finance department also wanted to "start looking at the audit procedures. We wanted to review all the rulings. We wanted to be able to project an image that the BIR can be trusted." He says they were planning to conduct a random sampling of assessments and review dockets. Before he got out of the Department, the official says he had even been talking personally to some revenue district officers. He says that he was hoping that they were sending "enough signals to the Bureau to '(get) your act together'."

But BIR Deputy Commissioner for Operations Romeo Panganiban does not seem worried at all by such fuss over the audits and the LAs, and the underlying concerns about corruption at the bureau. He says the "bigger damage" is if tax collections are misspent and not so much the potential losses from tax auditors who collude with or extort from business taxpayers.

He notes that the BIR's 1998 total collection reached P337.177 billion. This represented a share of 80.9 percent in the government's total tax revenue in 1998 as opposed to only 63.4 percent in 1993. Huffs Panganiban: "Dapat hangaan din kami (We should be admired)."

What Panganiban does not say is that the bureau was actually P17.89 billion short of its target for that year. The BIR's 1998 annual report also acknowledges that the collection of corporate income taxes was 18.6 percent short of the goal.

Tax year 1999 may not show much improvement. Media reports early this year said that the failure of 18 regional revenue offices to meet their collection targets had already added up to a shortfall of P28 billion.

(To be concluded)