The resignation of Bañez came amid a ballooning budget deficit and increasing complaints of poor revenue collection.
At Malacañang, President Arroyo immediately accepted Bañez’s resignation and appointed Finance Undersecretary Cornelio Hizon as acting BIR commissioner. The Pre-sident said Bañez resigned due to "extreme pressure."
Sen. Ralph Recto, chairman of the Senate ways and means committee, said the incoming BIR commissioner should be as "aggressive" as the "revolutionary tax" collectors of the New People’s Army (NPA), who he said were able to go after big firms, ordinary wage earners and even farmers.
Makati Business Club executive director Guillermo Luz said the government must not be pressured by lobby groups and that it should stand behind "good people."
The president of the Employers Confederation of the Philippines (ECOP), Donald Dee, said Bañez was "a great loss to the bureaucracy" and cited that he was "instrumental in instituting reforms" in the BIR and was "responsible for correcting flaws in the BIR and the system of taxation in the country."
Meeting the press at the Bangko Sentral ng Pilipinas building in Manila, Bañez said, "I strongly believe there are perpetrators who are out to sabotage the reforms by deliberately cutting back on collections during the first half of the year."
"They are undermining principles behind the reforms through a campaign to misinform the rest of the workforce. They are holding the country hostage in their desire to protect their own interests," he said without identifying the group.
He was BIR chief for 19 months.
Bañez said his resignation "paves the way for the additional flexibility for the incoming leadership, which will now take the bureau on to the next stage of the reform agenda."
Bañez had been blamed by congressmen for the budget deficit which is targeted at P130 billion this year but which has already risen to P119.7 billion in the first semester.
Government revenues in the first half of the year were expected to reach P303.5 billion but actual collections amounted to P266.9 billion, according to finance department figures.
In the second quarter of the year, overall collection fell short by 14.72 percent to P104.9 billion from the targeted P123 billion.
The large taxpayers unit of the BIR national office, for instance, was 24-percent, or P10.5 billion short of the targeted P43.4-billion. Actual collection was P32.8 billion.
Despite the poor collections, the government insists it can keep the deficit within the P130-billion ceiling. Some analysts say the deficit may have already reached P130 billion due to poor revenue collection.
The July budget deficit data is scheduled for release sometime this week.
Sources close to Bañez said he resigned in an "ultimate sacrifice" rather than allow the budget deficit to grow "beyond imagination."
The unidentified group threatened "non-collection or extremely poor collection" if Bañez continues to hold office, the sources said. In effect, "they were holding (Bañez) and the country hostage."
Bañez is the second high-profile government official to resign in a week, and the third in less than two months. Raul Roco resigned as education secretary on Aug. 13, while Vice President Teofisto Guingona vacated his post as foreign affairs secretary on July 3.
"I accept the resignation of BIR commissioner (Bañez) with a sad heart. He is a strong advocate of instituting reforms at the BIR, and a staunch ally in my own advocacy of good and effective governance," Press Secretary Ignacio Bunye said quoting from a presidential statement.
"Let me therefore thank Commissioner Bañez for the very courageous efforts he undertook during his term at the BIR. Secretary (Jose Isidro) Camacho and I congratulate him for the milestones he was able to muster in so short a time and under extreme pressure from the many stakeholders of the country," Mrs. Arroyo said.
"Commissioner Bañez’s desire to restructure the BIR comes with very good intentions to expand the revenue base of the country. He also worked hard toward freeing the system from political pressures to ensure the long-term sustainability of our collection efforts," she said.
Bunye said the President decided to accept Bañez’s resignation because of his admission that he would not be able to meet tax collection targets this year due to resistance from certain quarters negatively affected by the structural reforms he had put in place.
Quoting Bañez, Bunye said the former BIR chief explained it "quite well" that resistance to long-term reforms was endangering the short-term goals of the government in meeting revenue collection this year.
Bañez’s is also the third case of an official in the Arroyo administration forced to resign due to subordinates’ opposition to reforms he had instituted. First was Vitalino Nañagas of the Social Security System, and second was Roco.
On Aug. 1, President went to the BIR head office in Quezon City to defend Bañez from graft accusations leveled by Rep. Aniceto Saludo (Lakas, Southern Leyte).
Despite the resignation of Bañez, Mrs. Arroyo promised to continue his reforms as crafted in Executive Order 114 which she signed on July 29. Camacho echoed the President’s statement.
EO 114 authorized the BIR restructuring from January 2003, into a "taxpayer-focused organization" and strengthening of the tax collection functions of the agency.
The proposed Internal Revenue Management Authority (IRMA) bill implements massive reforms such as freeing the position of head commissioner from political influence and for the BIR to be administered like a private corporation.
Bañez may have alluded to BIR personnel resisting his reforms and who believed that these reforms may cause their dismissal from office.
He said his reforms would not lead to mass layoffs but only a restructuring and realignment of the bureau.
"The next BIR chief should be able to rally his troops to collect more taxes even if the economic conditions are not conducive to such," Recto said.
He however cautioned the incoming BIR chief not to be too aggressive as to put his integrity into question. He said the new BIR chief must have the "brains to outwit tax evaders and the balls to go after them."
Recto said a BIR chief "should not fear wielding the stick on tax evaders... more so with tax collectors throughout the country."
Recto noted Bañez was an "honest man" and that he "did not
enrich himself in office."
He said the former BIR chief "did not use the vast powers at his disposal to harass anybody."
Rep. Prospero Nograles (Lakas, Davao City) said the huge shortfall in tax collections had made Bañez’s continued stay at the BIR untenable.
He said the President should replace him with somebody who could collect taxes fast and in big amounts to enable the government to narrow the budget deficit this year.
Nograles was among several congressmen who had called for his ouster.
Another critic, Rep. Wilfrido Buyson Villarama (Aksyon Demokratiko, Bulacan), hailed Bañez’s decision to resign. He urged other government officials who are not performing well or who are enriching themselves to also quit. – With Efren Danao, Jess Diaz, wire reports