MANILA, Philippines - Finance Secretary Margarito Teves said the performance assessment of tax officials should be adjusted to improve the efficiency of the Bureau of Internal Revenue (BIR) to collect taxes.  

Currently, a BIR official's tax collection performance -- the actual taxes collected within a given period versus the targets -- is given a weight of only 25% in the official's final grade.

"[The] 25% [weight] on revenue collection is just too small," Teves said in a meeting with BIR officials on Wednesday.

He wants revenue collection performance to account for 50%.

Under the Lateral Attrition Law of 2005, a system of reward and punishment for BIR and Bureau of Customs officials and employees is imposed depending on their performance. Those who fall short of their collection targets by at least 7.5% would be dismissed from service. 

The BIR fell short of its total collection targets by 4.28% or P33.318 billion last year, preliminary data showed. The agency has earlier admitted that it cannot meet its collection goal of P798.5 billion for 2009.

Less complex

Teves also said the performance standards should also be less complicated.

The BIR currently assesses the performance of its officials based on key performance indicators (KPI). Percentage points are assigned to every aspect of a BIR official's daily chores such as collection, enforcement, and customer service.

There are 22 KPIs in all.

"The [current] 22 indicators are just too complicated," Teves noted.

Instead of looking at too many indicators, Teves said the tax bureau should simplify its grading system by reducing its KPIs to 4.

Specifically, he suggested that only the following KPIs be retained:

• Revenue collections - 50%
• Governance programs - 15%
• Customer service - 15%
• Tax administration improvement - 20%

If the new set of KPIs will be implemented this year, Teves said the BIR will be able to shore up its revenue collections since their staff's performance would be largely based on their ability to collect taxes.

"I believe we're capable of doing much more. Let's forget about 2009 and do something about 2010," he said.

The BIR currently accounts for 70% of the country's total tax revenues. If it is able to collect more taxes, then the government need not resort to borrowings to finance its spending.

Tax effort

Low tax collections have been blamed for the country's swelling budget deficit, which is expected to have reached P290 billion in 2009.

This has also led to a declining tax effort, which likely placed the Philippines on the same path that led to the fiscal crisis. (Read: 2009 tax effort trails pre-fiscal crisis trend: World Bank)

"What we need to do is move the tax effort upward," Teves said.

Tax effort refers to the ratio of taxes collected by main revenue agencies, BIR and Bureau of Customs, to the size of the country's economy, which is mainly measured by the gross domestic product (GDP).

As an economic indicator, it mirrors the ability to raise revenues for infrastructure, social services, and other initiatives.

Raising the tax effort, however, wouldn't be easy. Teves warned that 2010 may prove to be a challenging year as the government has been spending more to pump-prime the economy and reconstruct various areas affected by recent typhoons. (Read: Post-crisis, RP braces for low tax effort)

He also noted a number of revenue-eroding measures recently passed by Congress, saying that these may make it more difficult for the BIR to meet its collection targets.

BIR strategies

The BIR, under the leadership of new commissioner Joel Tan-Torres, is bent on meeting its P830-billion collection goal this year as it came up with several tax-enhancement measures and reshuffled its staff.

On Wednesday, Tan-Torres introduced the tax bureau's 10-point agenda for 2010, which placed focus on public awareness:

• High visibility public awareness campaign on the enforcement and service BIR programs
• Integrated approach in administering large taxpayers
• Reinvigorating the Run After Tax Evaders program
• Enhanced and strategic enforcement approaches
• Focus on big-ticket items
• More vigorous third-party matching campaign
• Expanded linkage with key institutions
• Effective partnership with taxpayers and tax practitioners
• Close monitoring of tax-eroding measures and investment incentive programs
• Motivating the BIR workforce

"We want taxpayers to be aware of what we're doing. We want them to know the services that we are pursuing at BIR," Tan-Torres told reporters.