Philippine's Tax Chief Quits After Alleging Corruption

by Mary Swire, Tax-News.com, Hong Kong

21 August 2002

After Philippine tax workers demonstrated last week against the Chief Tax Collector's Rene Banez's proposal to transform the bureau into an Internal Revenue Management Authority, which would link pay and tenure of senior officers to performance, he resigned yesterday.

Mr Banez, who wanted to be able to fire corrupt and incompetent tax collectors, accused opponents of reform of stirring up trouble among the agency's employees and undermining tax collection to thwart changes at the agency. "I strongly believe that a few perpetrators are out to sabotage the reforms by deliberately cutting back on collections during the first half of the year," he said.

Philippines President Gloria Macapagal Arroyo admitted in her State of the Nation Address two weeks ago that tax collections are running far behind target, while government spending is increasing as planned, so that chances are diminishing of reaching the 3% deficit target she had imposed for this year. And this despite the fact that growth seems likely to come in at or above the government's 4% target. In her Address, Mrs Arroyo said she would take strong administrative measures to improve the situation, focussing particularly on widespread tax evasion and corruption among tax inspectors.

Total tax collections this year seem likely to reach only 13% of GDP, while Malaysia for example takes in 20% and Japan collects over 30%. Investors have been worried about the fiscal picture since July, when the government admitted that its first half budget deficit reached 119.7bn pesos ($2.3bn), just a few billion pesos short of the 130bn peso full-year target.

Recommended