Changes to attrition law guidelines mulled

MANILA, Philippines - Changes to the implementing rules of a law intended to motivate revenue officials and workers to work harder are being mulled to address complaints about how revenue goals are being set. At a hearing by the House oversight committee on Wednesday, Socioeconomic Planning Secretary Augusto B. Santos said the procedure in setting the tax and Customs bureaus’ collection targets needs to be revisited in response to the clamor of the two bureau chiefs for "realistic" goals. "There are complaints that the bureaus are finding it hard to meet the targets set. We have to review the entire thing before deciding on this," Mr. Santos said. Republic Act 9335 or the Attrition Act of 2005 and its implementing guidelines state that the tax and customs bureaus’ performance by yearend shall be assessed based on the "original estimated revenue collection... stated in the Budget of Expenditures and Sources of Financing (BESF) submitted by the President to Congress." This provision ties the two agencies to original targets and makes no room for adjustments during the year even when the macroeconomic assumptions used in setting those goals no longer hold true. Mr. Santos, as director-general of the National Economic and Development Authority, sits as member of the Revenue Performance Evaluation Board (RPEB), the body formed by the attrition law to review the tax and Customs bureaus’ collection performance. The board is headed by Finance Secretary Margarito B. Teves. A third member is Budget Secretary Rolando G. Andaya, Jr. The tax bureau was tasked to collect P765 billion last year but collected only P713.6 billion, while the Customs bureau was given a P228-billion goal but came up with only P209.4 billion. Customs Commissioner Napoleon S. Morales had said the macroeconomic assumptions used by the target-setting Development Budget Coordination Committee — particularly peso-dollar exchange rate and volume of imports — fell far from the actual figures in 2007, making it impossible for the agency to meet its goal. This year, the tax bureau needs to collect P845 billion, and the Customs bureau, P254 billion, to finance bulk of the government’s P1.226-trillion budget. Finance Undersecretary Gil S. Beltran said any change in the target setting procedure can be applied only next year since this year’s budget has already been set. Considering the long process entailed if the board decides to change the attrition law’s guidelines, existing rules will have to apply in the interim, Quezon Rep. Danilo E. Suarez, oversight committee chairman and co-author of the attrition law, insisted. Thus, "It is inevitable that some heads must roll" by May, he added. During the hearing, BIR Commissioner Lilian B. Hefti said 13 regional and 61 district offices of the tax bureau incurred deficits of more than 7.5% in 2007. While there was no representative from the Customs bureau, data from the agency showed that seven of its collection districts failed to meet their respective targets by more than 7.5%. Under the attrition law, officials who miss collection targets by more than 7.5% face dismissal or transfer of office. Those who exceed targets are entitled to rewards: to cash rewards if the bureau as a whole exceeds the goal, or to non-cash incentives if a unit within the bureau does. Mr. Santos said the RPEB also needs to look at possibly scrapping non-cash incentives and instead just provide cash incentives to officials and employees outperform goals. "For me, it does not matter if the reward is in cash or in kind. But if the IRR can serve to ’incentivize’ collectors to perform better, why not?" Mr. Santos said. The RPEB is set to meet again in May to decide whether or not it needs to revise the attrition law’s guidelines. - Anna Barbara L. Lorenzo, BusinessWorld