Kim Henares, One Tough Chick

"One trillion smackeroos, Mr. President? Sure 'nuf!"

I find it amusing that in the manly Philippines, where men wear their macho stuff like fighting cocks doing the victory strut, women occupy three of the toughest jobs in the land:

• Ombudsman:  Conchita Carpio-Morales
• Secretary of Justice:  Leila de Lima
• Head of the Bureau of Internal Revenue (BIR):  Kim Henares

Why women get the nasty job of hunting down killers and thieves warrants an investigative report, but that is a different blog. I will offer a simple guess that men don't like to investigate other men, or be investigated by them. It's too murderous.

Of these three powerful women, I'm guessing the toughest chick is Kim Henares. She's been tracking down scoundrels for years, and wants to keep doing it.

Incidentally, the Humpty Dumpty New World Dictionary has several definitions of "chick", and the one which is pertinent here is "chick: (3) noun, cool woman". The, we have to flip a few pages forward to find this definition: "(5) cool: adjective, admirable and hip". Flipping yet again: (3) "hip: adjective, stylish".

So thanks to the Big Egg Humpty, we discover that Commissioner Henares is one tough, admirable, stylish woman.

Why she is a cool woman

Well we can confirm this straightaway. For one thing, she does her job with no need to play games. She shoots straight, in more ways than one. Her job is to enforce tax collection in a nation where people take pride in cheating. But she goes after big fish, no matter who they may be, or to whom they are connected.

Try to find her biography on Wikipedia and you won't. She is not a political woman. She doesn't need fame and votes. She is a professional. She needs accomplishment.

Her available background information is sketchy. She graduated from Ateneo and got her law credentials. She has held private sector jobs as head of the ING Barings Bank’s compliance and legal department and senior private sector development specialist for the International Finance Corporation (IFC)/World Bank.

She joined BIR during the Arroyo Administration, serving as deputy commissioner for special concerns. She led the “Run After Tax Evaders” (RATE) operation, which led to cases being filed against celebrities Regine Velasquez and Richard Gomez among others. She was appointed to head the BIR in 2010 by incoming President Noynoy Aquino.

She was nominated as Chief Justice in 2012 but politely declined, arguing that she already had a big job, an important job, where she can make a difference.

The BIR

The goal of BIR is to reach 1.066 trillion pesos in collections this year. This is done through 19 regional offices responsible for  enforcing tax laws and collecting taxes. President Aquino has been applying some  heat to the tax offices, citing an expectation that they will reach the annual goal. Commissioner Henares acknowledges the challenge is tough, but is focused on making the goal.

"Yes, Comissioner, I'll pay, I'll pay!"

The BIR web site is an interesting place to visit. The home page is rather 50's in style, cluttered and hard to grasp. This is not an elegant site, by any standard. It is written for people who understand taxes, not those who don't, as there are links to resources a newbie would not understand, and can't understand because signing in requires a password.

The link to financial information in the right column leads to PDF scanned paper files that show expenditures for BIR as a whole. The revenue side - - how much each of the 19 regional agencies generates -- is not shown. So it is a secret, at least to JoeAm, as to how the 19 perform. Can you imagine the constructive heat that would be applied if the revenue generation accomplishments of each agency office were trended, say for five years, as a percentage of some indexing standard such as regional income or GDP?

That is what transparency is all about. That is what FOI is all about. That is what President Aquino is NOT advocating in a proactive way. Rather than complain about the level of taxes being generated, why not simply report results to the public and let the public's attention do the incenting for higher revenue? Publicly embarrass a couple of laggard regional offices, or, better yet, praise and reward the top achievers, and let me assure you, performance will improve.

But I digress.

The web site does reflect that automation is taking root, and that's good. It is possible to apply for a tax identification number on line, and, as a business, to report sales and taxes with payments made via participating banks. It is also possible to file a "whistle-blower" complaint about corrupt BIR employees on line.

The BIR value statement mentions that the BIR is "God fearing". That kind of thing is always a jolt to this westerner where laws requiring separation of church and state would make such a statement impossible. It is a clear indicator that the Philippines is motivated by values different than America.

Between totally modern and totally clunky, the BIR web site is half clunky. Or half modern, depending on how you need to use it.

RATE Progress

Commissioner Henares' priorities are to tighten up on collections and to automate processes to make the paper-intensive job of recording and reporting taxes easier, better and less susceptible to  manipulation. She grew up with the RATE operation, so she is riding it hard now.

According to a GMA news report, the BIR has filed 133 tax evasion cases representing P50 billion in unpaid taxes. One case case is P16 million from a contractor who has not filed tax returns for three years.  In another case, the BIR has filed criminal charges against the Registrar of Deeds in Manila who allowed a property transfer to take place without payment of the required P461,433 in taxes.

GMA also reported on a P63.9 million judgment successfully won in the Supreme Court against St. Luke's Medical Center in Manila. The precedent-setting ruling means that all hospitals that are non-profit but proprietary will have to pay income tax. The court ruled that the tax exclusion applies to charitable organizations, not organizations providing health care. The tax rate is a preferential 10%.

In August of this year, ABS-CBN reported on a BIR initiative to collect more taxes from sole proprietorships. The agency knows this area is grossly abused by tax evaders, and will deploy a larger field force through regional offices to identify evaders.

So the tax woman cometh in the Philippines.

Performance facts

Let's look at the BIR performance from the standpoint of a top-level observer, like, say, if we were President Aquino. Here's what we might look at:

Millions of Pesos

Measure	2009	2010	2011	2012	Notes
Philippine Tax Revenue	1,123,211	1,207,919	1,359,942	1,560,600	(a)
BIR Revenue	750,287	822,623	924,146	1,036,587	(a)
BIR % of Phil Rev	67%	68%	68%	66%
BIR Rev Growth	-3.6%	7.9%	12.3%	13.7%
BIR Rev % GDP	10.1%	9.1%	9.5%	10.0%
BIR Expenses (Actual)	5,737	6,508	7,178	10,114	(b),(c)
BIR Exp to BIR Rev	0.76%	0.79%	0.78%	0.98%

(a) 2012 is annual projection by Department of Finance

(b) 2012 reconciliation is impossible to the layman as quarterly accounting forms are detailed and technical

(c ) The 2012 BIR expense budget is P11.114 billion. History shows that actual expenditures can be as much as P1,000,000 less than budget, and that adjustment has been made to reflect estimated "actual" 2012 expenses.

Here are some highlights we can pull from this table:

• Overall Philippine revenues are up steadily and BIR revenue growth is a major contributor, steady at one-third of all Philippine revenue. Customs and other agencies make up the other third.

• Growth at 13.7% this year is a huge step-up. The pace has accelerated three years running.

• BIR expense to revenue is increasing. I liken this to oil fields that are maxed out. The hunting for the remaining sources is difficult and costly. The BIR's hunt for tax cheats is returning smaller denomination "finds". But they are still worthwhile, considering that it costs only 1% to acquire 99% usable revenue.

Proposed "sin taxes" of from P20 to P60 billion would be a nice kick to total revenue.

Some expansion of the tax base is natural as the Philippine economy grows. Add to that more disciplined collections and new taxes like sin taxes, and the Philippine revenue stream looks healthy.

Better automation is a priority for Commissioner Henares, and will be a good investment both for improved  BIR management "by objectives" and for ease of processing by tax payers.

Conclusions

The BIR is in good hands.

Web-available information on revenue generated by the 19 agency offices would help incent good performance by those offices. Similarly, web-based  financial reports of the agency would be more useful if recorded in spreadsheet format rather than as scanned paper documents.

Conclusion: sound agency, making progress, lots of work to do.