“We were becoming less successful in collecting taxes, and our Tax Effort Ratio had seen a dramatic decline,” explains Lilia Guillermo, CIO of BIR. The Tax Effort Ratio is a gauge of tax collection efficiency, representing total revenue collections divided by GDP. “We realised that against a backdrop of ongoing changes to the tax laws, we had to think out of the box to generate tax revenue. So we decided to concentrate our efforts on improving compliance of large taxpayers.” Focusing on companies’ declaration of Value Added Tax (VAT), BIR moved to automate the correlation of sales and purchase records, using an analytics solution from software vendor SAS to generate reports of discrepancies between company’s reported sales, and issued sales receipts.
“The whole concept of implementing a datawarehouse came about because we knew that if we could set aside declared VAT information and compare it with third party information, we knew we could find discrepancies,” explains Guillermo. “And after generating these discrepancies, we went after taxpayers – and told them they could not fool us anymore. This is how we have managed to generate a clear ROI for our use of technology.”
In one year alone BIR uncovered 70 billon pesos (US$1.25 billion) in under-declared tax, and managed to collect 6 billion pesos (US$107 million). This represents a ROI on the cost of the SAS implementation of more than 375 per cent.
BIR is now able to generate taxpayer compliance ‘report cards’ which compare ratios of income tax paid between different companies in the same industry. According to Guillermo, a practice of showing CEOs how their organisations compare with their peer group in terms of tax compliance has been a very effective means of raising compliance industry-wide. As she says, nobody wants to be at the bottom of the tax compliance league table.
"Taxpayers used to deliberately try to confuse us and they were very determined not to provide us with required information," continues Guillermo. "But now we have links with the Bureau of Customs (BOC), and their database interfaces with ours to check whether the taxpayer information reports are consistent. Taxpayers are definitely more respectful of us now because they know our information on them is correct. We have been able to send taxpayers to court – and faced with the evidence against them, they always pay up! These are things that have not happened before.
Sharing best practice
“We have a very high level of computerisation at BIR. I certainly think that there is a clear acknowledgement in the rest of government that we have been the number one agency using technology in the Philippines,” says Guillermo. “Because we generate revenue for the government it is easy to see the impact of our technology use. Year in and year out we have to justify the budget we want, so it is critical for us to demonstrate a return on our investment in technology. We have to be able to tell Congress that whenever you provide us the money, you will see a clear correlation between investment and return.”
Guillermo hopes that BIR’s success will spill over to other parts of government. PhilHealth, another revenue-generating agency that manages health insurance for Filipinos, has already taken a keen interest in the BIR implementation, and the experience of installing and managing a datawarehouse is something that other agencies are looking to leverage, such as the Central Bank of the Philippines and its handling of monetary policy data.
“I think that we can be very proud of what we achieved. We have revolutionised tax collection and increased tax yields,” says Guillermo. “We have been able to send taxpayers to court – and faced with the evidence against them, they always pay up! I hope that we have changed the image of the BIR, as well as demonstrated what technology can do when properly applied.”
Autor: Lilia Guillermo
Quelle: Public Sector Technology & Management, 28.01.2005
