POSTSCRIPT / March 6, 2014 / Thursday

By FEDERICO D. PASCUAL JR.

Opinion Columnist

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Publish income taxes paid by top gov’t execs

BARE ALL!: Instead of (or aside from) zeroing in on one profession and shaming its tax-evading members, the Bureau of Internal Revenue can do a distinct public service by:

• Publishing in one blow the 2010 to 2012 income tax payments made by top government officials from the President, the Vice President, justices of the Supreme Court, senators, congressmen — and BIR Commissioner Kim Henares herself.

• Following up with a similar publication of the 2010-2012 income tax payments of Cabinet secretaries and undersecretaries, bureau directors and their equivalent, generals and their equivalent in the AFP services and the police, the chairmen and presidents of government-controlled corporations.

There is no good reason to hide from the public the income tax payments of top officials, who should set an example, especially with the coming deadline for the filing of income tax returns.

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BOGUS COLLECTOR: We are reminded of an acquaintance, who during ITR filing week decades ago would position a table with his BIR friends at the lobby of the old finance building with a sign saying “File Income Tax Here”.

They appeared legit, dressed properly, equipped with official receipts, stamp pads, and such paraphernalia. Being a fixture and fixer, nobody bothered him during his week-long operation till deadline day.

He would collect a considerable sum from unsuspecting taxpayers. At the end each day, he would crumple and throw away the ITRs filed, then repair to the nearby Manila Hotel with his BIR associates to divide the loot.

Still new then to the ways of this wicked world, I wondered why nobody bothered or arrested him — and what ever happened to the taxpayers whose ITRs he had thrown away.

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LAX RULES, CONNIVANCE: We are also reminded of Bataan Gov. Enrique “Tet” Garcia, the unsung hero who by simple logic and clear thinking plugged the stealing of billions in internal revenue and customs duties by syndicates conniving with bank managers.

Their modus operandi was simple: Checks paid by big taxpayers were intercepted by key bank officials, deposited in a temporary account opened to catch the diversion. After the amount was withdrawn, the account was closed.

The operation, which ran for years, was possible because of lax rules, and with the connivance of bank managers, some of whom were convicted years after Garcia exposed the scam.

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SOLUTION: Then a congressman, Garcia was initially frustrated by the lack of interest of some finance officials at the time, tempting one to suspect they were protecting the syndicate, including some banker friends.

Or it could be that they were jealous of the fact that it took an outsider, a congressman, to work out a solution to the collection leak under the Executive department. That was during the Arroyo administration.

Garcia’s solution: A new rule was to be imposed that all check payments bore a coded number to mark and separate them as intended for either the BIR or the customs bureau. They were thus automatically credited to either – without delay and without human intervention.

* * *

THANK YOU: The solution was so simple that it was a mystery nobody during the Arroyo administration thought of it. (Or maybe they thought of it, but did not want to adopt it for whatever reason?)

Immediately the deep well of dirty billions dried up. Some bank officials were convicted, but we heard some of their accomplices escaped.

In recognition of his innovative problem-solving and for saving the Republic multibillions, Garcia received a letter thanking him during the administration of President Noynoy Aquino.

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VAT ISSUES: Another favorite tax topic that Garcia chewed on, also with frustration, was the Value-Added Tax that a voracious government bites off every merchandize sold and service rendered at the rate of 12 percent with every transaction.

That statement is misleading, because not every good or service is VATted 12 percent. In many cases, probably at least a third of them, there is no VAT either because of system leakages or the customer opted to dispense with the BIR-ordained receipt.

These un-VATted items fall are hidden in the underground economy. These are goods and services that sneak under the BIR radar mostly through the expedience of official receipts not being issued.

* * *

MISLEADING: The other misleading point is that the 12-percent VAT is not tacked on only at the end of the line when the end-consumer takes delivery of the goods or services.

The 12 percent is slapped on every time there is a transaction. The more turnovers, the bigger is the resulting cumulative retail price padded by the succession of the repetitive tax.

Cowhide, for instance, is sold to the tanner and is taxed 12 percent. The tanner sells the leather to a shoemaker and another12-percent is collected for value-added. The shoemaker sells the shoes to a wholesaler and they are again taxed 12 percent. The wholesaler moves the goods to the retail store where another 12 percent is added. When the customer buys the shoes, he is taxed a final 12 percent again!

* * *

VAT STOLEN: When buyers complain that prices are high and getting higher, one culprit is repetitive VAT.

An anomaly is that the VAT collected by all merchants along the way does not necessarily go to the government. There are no reliable figures, but easily one can say at least half of the VAT collection is pocketed by the merchants.

Garcia once said that based on his studies, only about three percent of the 12-percent VAT ends in the government coffers. In short it is stolen from taxpayers.

* * *

CLARK GOLF CUP: Beat the deadline for registering for the first Clark Golf Cup set March 21 at the Mimosa Golf & Country Club at the Clark Freeport in Pampanga.

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(First published in the Philippine STAR of March 6, 2014)

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