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Hefti Reorganizes BIR to Meet Targets

Written by Lala Rimando
Friday, 23 November 2007
The head of the Large Taxpayers Service—which accounts for about 60 percent of the entire bureau’s performance—is moved out Tax bureau commissioner Lilian Hefti appears determined not to go the way of her predecessor who lost his job for failing to raise tax revenues. To meet the tax collection goals for the second half of the year, she let go of a subordinate she has handpicked to lead a crucial division. Cesar Charlie Lim, whom Hefti has assigned to lead the Large Taxpayers Service (LTS) regular division when she assumed office mid-year, was recently reassigned to another post after failing to meet his group’s collection goals in September. LTS is a special unit at the bureau which focuses on monitoring the tax payments of the country’s biggest corporations. Performance of the LTS is crucial since it accounts for about 60 percent of the entire bureau’s performance, which in turn accounts for two-thirds of the revenues used by the government in funding social services, infrastructure project, the military budget, among others. Analysts and foreign creditors use the performance of the tax bureau as an important gauge of the government’s will to keep its fiscal house in order. Hefti’s predecessor, Jose Mario Bunag, was sacked after missing collection targets despite the passing of the Revised Value Added Tax Law in 2005, which increased tax rates. Hefti promised to do her best to collect P730 billion from its operations and P766 billion of taxes from government securities for the second half of the year, which accounts for 52.5 percent of the bureau’s total 2007 target. When she assumed office in late June, she told reporters that besides going after tax cheats through the Run After Tax Evaders program, enhancing the bureau’s excise tax administration, and using IT tools to monitor the correctness of tax payments, she said she will closely monitor her subordinates to ensure the tax bureau meets its monthly goals. Shortfall in September Target Meeting the monthly goals seems to have become a do-or-die situation at the bureau, and Lim’s expulsion from the LTS is supposed to hammer that message home. (Hefti and Lim did not reply to our requests for interview and questions sent by fax.) The LTS met its monthly goals in July and August, the first two months of Hefti’s reign. But come September, it was P990 million short of its monthly target of P27.3 billion. That put the total January to September shortfall of the bureau at P45 billion. To promote efficiency, Hefti split the LTS last July into three components: the excise tax division, the Makati/Cebu division, and the regular division. Lim headed the regular division, which has the highest target of P265 billion, compared to the previous two’s P160 billion and P47 billion only. During a recent conference with President Arroyo on the revenue accomplishments of the bureau, the performance of Lim’s group was highlighted to explain the tax collection shortfall in September. It must have prompted Hefti to sacrifice Lim, whom she has handpicked to be part of her team early on. Balancing Act The decision to choose Lim and the circumstances in letting him go indicate how Hefti, a homegrown bureaucrat, is balancing two things: selecting those whom she deems are the appropriate lieutenants who will follow her marching orders and the weight of short-term expectations as far as bringing in the tax collections is concerned. Lim is a CPA-lawyer and a former University of the Philippines tax professor whom Hefti plucked from the Makati South area. Choosing Lim has its pros and cons. Lim, his friends say, understands how work is done in the field. He also has an appreciation of the big picture since part of his 15 years in the bureau was spent as a technical assistant to a previous deputy commissioner who worked on the Value Added Tax and other key committees that coordinated with economic agencies in mapping out the country 's taxation approach. But according to some accounts, his personality tends to turn off some people as he can be haughty. Others are critical of his field experience. They say this clouded his approach towards the country’s top companies. In his past position, assessment documents for medium to small taxpayers are just about a half-inch thick. But for the large taxpayers, assessment documents can pile up to a foot long, because their transactions tend to be more and are also complicated. Thus, due to limited personnel, the previous LTS heads randomly chose about 100 to 150 from a list of about 700 top companies in the country to check. But Lim increased the sample size to about 400 right after he assumed his post. Apparently, Lim’s logic to this approach, according to sources from the bureau, is to instill fear among the rest of the companies covered by LTS, which were not being assessed before. Unresolved Cases It used to be that those large companies that the tax assessors did not cover in the past were simply assumed to be voluntarily paying the right taxes. A tax assessment includes matching the accounting documents submitted by the taxpayer, such as those pertaining to withholding taxes, and the income reported by their recipients. So by sending the message that the LTS is going to check more companies than they used to, those that were not being assessed before are expected to make sure they are paying the right taxes this time. To cope with the increased coverage, Lim added about six new assistant division chiefs to the LTS regular division’s existing 15. The new personnel are monitoring six industry groups, namely insurance and other financial institutions, banks, manufacturing, real estate and trading, utilities and transportation, and other services. Inevitably, the new tax assessors would now cover some of the large companies previously assessed by the old supervisors. Some taxpayers who were considered sacred cows by their old tax assessors would already have to deal with new tax assessors who may unearth—and possibly expose—skeletons in their closets. Within the bureau, some have been wondering about the unresolved 500 or so civil cases aggregating to about P5 to P7 million filed in the LTS office against large taxpayers. They have already exceeded their three-year prescription period so insiders suspect that there might have been “extracurricular negotiations " between the LTS tax assessors and the companies they were supposed to be policing. Newsbreak sources within outside the BIR say Lim’s initiative to put new assessors in the turf of the old-timers was bent on addressing these extracurricular negotiations. Lim apparently has the blessings of Hefti since this approach was not a mere fire-fighting tactic, but would provide more long-term benefits, resulting to sustained and higher tax collection efficiency. Tambis vs Lim However, this approach reportedly put Lim on collision with Rey Asterio Tambis, his subordinate who headed the audit and investigation division at LTS. Their inability to work together was attributed as the reason for the poor performance of LTS in September. Tambis is said to have the backing of some politicians from the administration party. His entry into the LTS group reportedly caused the transfer of the authority to choose who among the companies classified under LTS will be audited and who among the assessment supervisors will do the auditing. According to Newsbreak sources familiar with the two, this apparently did not sit well with Lim who felt he was stripped off the power to assign who among his new and old subordinates will do what. That means the potentially misbehaving taxpayers are assured that their protectors in the bureau remain where they are. On the surface, these may seem irrelevant now, since Tambis, like Lim, was also removed from the LTS. Effective November 19, Lim and Tambis have been replaced by Romulo Aguila, formerly the revenue district officer of Mandaluyong City, and Albino Galanza, who came from Tuguegarao, Cagayan. Lim was transferred to Valenzuela City where he is now the regional director, while Tambis took over Aguila’s post in Mandaluyong City. Meantime, whether the newcomers at the LTS will follow through the progressive—but divisive—initiatives of Lim, and whether Hefti will support strategic, not just fire- fighting tax administration measures, will be worth watching. INTERACT WITH THIS ARTICLE
Last Updated ( Monday, 26 November 2007 )

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