13TH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
S E N A T E  
Introduced by Senator Ralph G. Recto 
EXPLANATORY 
NOTE 
The 1987 Constitution prescribes a progressive system of taxation that is 
uniform and equitable. It is a tall order that continues to be a struggle for the 
government, particularly the Bureau of Internal Revenue (BIR), to achieve. For 
fifteen years, since the re-democratization of our country, too many attempts by 
Congress and the Executive to evolve a tax system that reflects the democratic ideals 
of fairness, efficiency and simplicity, have been made but all these fell short of the 
promise. 
To this day, our tax system remains highly flawed and regressive largely 
brought about by the excesses in the bureaucracy. It discourages people from paying 
the right taxes or worst, from paying taxes. The collective wisdom points to a 
general dissatisfaction over the public services that government provides or could 
hardly provide and to a mass disenchantment over the corruption that reigns in the 
revenue agency. Economists have often pointed out a corrupt bureaucracy easily 
weakens even the most efficient and effective tax system. 
Government is desperate. Fiscal deficit has reached unprecedented 
proportions and the country's debt stock is increasing by almost a million pesos 
every minute. From a P210 billion budgetary shortfall in 2002 and P200 billion in 
2003 and an outstanding debt of P4.1 trillion as of February 2004, the specter of a 
debt crisis looms ahead. Even if BIR collection increases from P425.4 billion in 2003 
to P488.6 billion this year, government is still doomed to borrow more because every 
centavo that Juan De La Cruz pays in taxes will all be set aside for debt servicing 
which is programmed to reach P542.2 billion by end-2004. 
This bill seeks to address the seemingly perennial problem in tax 
administration by proposing the creation of a National Revenue Authority (NaRA) 
which is vested with administrative independence and fiscal autonomy. It will 
provide for an institutional mechanism that will separate professionally competent 
employees, who are willing to work for a competitive salary, from those who want 
to continue with the old ways of doing things - political patronage, red tape, 
complicated and manual processes, and traditional mentality of government waiting 
for taxpayers to submit information rather than government actively seeking 
information. 
Efficiency has never been the hallmark of civil service. Neither is integrity. 
And the BIR has always been known to be lacking in both departments. This bill 
endeavors to bring back both efficiency and integrity into the country's tax 


administration system by granting the revenue agency corporate powers which will 
give its new management the flexibility to implement policies and measures as it 
sees fit in accordance with its vision, mission and goals. The BIR today is shackled 
by too much bureaucratic interference that its Commissioner cannot pursue new 
ways of doing things without having to seek approval by the Secretary of Finance or 
by Congress or even by the President. 
As an independent body akin to the Bangko Sentral ng Pilipinas, the revenue 
agency will be sanitized from political pressure since it will not have to seek its 
yearly appropriations from Congress and it will have the its own system of hiring, 
transferring, promoting and firing its personnel. Postings will no longer be 
discretionary as has been the practice under the present set-up and even the Chief 
Executive Officer will have a work performance contract for each four-year term and 
is not co-terminous with the appointing power. 
There have been proposals in the previous Congress that sought the creation 
of independent revenue authorities: the Internal Revenue Management Authority 
(IRMA), the National Authority for Revenue Administration (NARA), and the 
Internal Revenue Commission (IRC). This piece of legislation embodies similar 
features but differs in the details. To wit: 
1. The NaRA under this bill stands for National Revenue Authority 
compared to the National Authority for Revenue Administration 
defined in the House proposal. 
In its declaration of policies, the bill puts more emphasis on principles of 
a good tax system than on the structure of the revenue agency itself. 
It includes an incentive scheme wherein the bill grants an additional 
service fee to the NaRA if its actual tax collections exceed the tax 
collection targets in the preceding year. The additional service fee will be 
equivalent to one percent of the difference which shall be distributed as 
incentive bonus to employees of the NaRA who have shown exemplary 
work performance based on an evaluation system adopted by the 
Internal Revenue Board. 
The powers and functions of NaRA are vested on the Internal Revenue 
Board which shall be composed of seven members, three of whom are 
ex-officio (Secretary of Finance, Secretary of Budget and Management, 
Director-General of NEDA), and four from the private sector. But unlike 
the House proposals, this bill requires that those coming from the 
private sector shall sit in the Board as full time members and as such, 
should divest any interests they might have in the private sector. They 
shall be appointed without regard to political affiliation and solely on 
the basis of their professional expekience and expertise in certain field of 
specialization. In addition, the bill provides pre- and post-employment 
prohibitions for members of the Board. 
It likewise emphasizes that the organizabonal structure to be 
determined by the Chief Executive Officer (CEO) and approved by the 
Board shall be based on functional lines to reduce collusion of taxpayers 
and tax collectors. 
The bill mandates the CEO to establish and implement a written code of 
conduct for all employees in the NaRA. 
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The trend of separating the wheat from the chaff, i.e. tax administration from 
public administration, has gained momentum over the past decade and has shown 
impressive results. According to a studyl, “in countries where the revenue 
performance had been deteriorating badly, such as Argentina and Peru, revenues 
have increased by over ten percentage points of the GDP. In Uganda, the tax/GDP 
ratio increased from 4 percent pre-authority period to about 10 percent in the post- 
authority period. In countries such as Spain and Singapore, which have the ability to 
pay competitive salaries and to purchase the capital equipment needed to 
modernize, the quality of the tax administration has been dramatically improved. In 
all cases, the level of taxpayer service and the professionalism of the staff of the tax 
administrations have been greatly enhanced.” 
Indeed, the BIR is currently faced with a tremendous task of producing the 
financial resources the country needs without having to borrow more. It has to 
modernize if government wants it to respond to changes in market conditions. It has 
to provide a more suitable environment for the development of an honest, efficient, 
innovative, professional and service-minded revenue personnel if government 
wants to optimize revenue collection. It has to operate as efficientIy as the private 
sector if it wants to keep up with the rest of the economy. 
The approval of this bill is thus earnestly sought. 
’ Jenkins, Glenn and Rup Khadka, “Modernization of Tnx Administration in Low-Income Counhies: The Case 
of Nepal” Discussion Paper No. 68 Consulting Assistance on Economic Reform I1 Harvard Institute for 
International Development September 2000. 
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TWELFTH 
CONGRESS 
OF THE 
1 
REPUBLIC OF THE PHILIPPINES 
1 
Second Regular Session 
1 
'04 
JUL -6 AlO.17 
S E N A T E  
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Introduced by Senator Ralph G. Recto 
AN ACT 
CREATING THE NATIONAL REVENUE AUTHORITY, 
PROVIDING FUNDS THEREFOR, AND FOR OTHER PURPOSES 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
Article I 
ESTABLISHMENT AND ORGANIZATION OF THE 
NATIONAL REVENUE AUTHORITY 
SECTION 
1. Short Title. - This Act shall be known and cited as the "National 
Revenue Authority Act of 2004." 
SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State: 
to implement a progressive tax system; 
to maximize national government tax revenues and optimize resource 
utilization through a fair, equitable and simple tax system; 
to develop a highly motivated and professional internal revenue service 
employees with utmost responsibility, integrity, loyalty and efficiency, 
and who act with patriotism and justice, and lead modest lives; 
to adopt measures that will promote morale, efficiency, integrity, 
credibility, responsiveness, progressiveness and optimization of all 
potentials in revenue-generation of the government; and 
to establish a strong tax collection agency, devoid of political influence, 
that will provide Filipino taxpayers with top quality service by helping 
them understand and meet their tax responsibilities and by applying the 
tax law with integrity and fairness to all. 
SEC. 3. Creation of the National Revenue Authority (NaRA). - There is hereby 
established an independent national revenue authority, which shall be a body corporate 
known as the National Revenue Authority, hereafter referred to as NaRA, and shall be 
attached to the Department of Finance (DOF). 


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The NaRA shall have an authorized capital of 
Ten Billion Pesos 
(~lO,OOO,OOO,OOO.OO), to be fully subscribed by the Government of the Philippines, 
hereinafter referred to as the Government and shall be paid up by the transfer to the 
NaRA of assets valued in such amount. Initially, the national government shall transfer 
to the NaRA such assets as may be determined pursuant to Section 21 of this Act. 
SEC. 4. Responsibility and Primary Objective. - The primary responsibility and 
objective of the NaRA is to raise revenues to finance the operations of the Government 
consistent with fiscal policy and revenue collection targets. 
SEC. 5. Place of Business. - The NaRA shall have its principal place of business in 
Metro Manila and may establish branches and offices in such other places as may be 
deemed necessary for the performance of its mandate. 
SEC. 6. Corporate Powers. - The NaRA is hereby authorized to adopt, alter, and use 
an official seal which shall be judicially noticed; to enter into contracts; to lease, own or 
otherwise acquire real and personal property; and to hold, sell or otherwise dispose of 
the same; incur obligations and other liabilities necessary in the conduct of its 
operations; and to perform any and all acts necessary or proper to carry out the 
purposes of this Act: Provided, however, That amounts to be used for the repayment of 
loans and other obligations incurred under this provision, including the interest 
payments for such obligations, shall be taken from the service fee that the NaRA shall 
receive from the Government under Section 7 of this Act. 
SEC. 7. Sewice Fee. - The NaRA shall receive an annual service fee from the 
Government for services rendered in the discharge of its mandate. Subject to the 
recommendation of the Development Budget Coordinating Council (DBCC) created 
under Executive Order No. 232, series of 1970, as amended, said fee shall not fall below 
one percent (1%) 
nor go beyond two percent (2%) of all national internal revenue taxes, 
fees, and charges collected by the NaRA in the immediately preceding calendar year: 
Provided, That in the initial year of operation, the service fee shall be 2% of all national 
internal revenue taxes, fees, and charges collected in the immediately preceding year. 
Said amount shall be appropriated in the annual General Appropriations Act. 
In the event that the actual tax collection of the preceding year exceeds the tax 
collection targets, the NaRA shall be granted an additional service fee in the amount 
equivalent to one percent (1%) 
of the difference between the actual tax collection and 
tax collection target which shall be distributed as an incentive bonus to employees of 
the NaRA who have shown exemplary work performance based on an evaluation 
system adopted by the Board. 
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Article I1 
THE INTERNAL REVENUE BOARD 
SEC. 8. Composition of the Internal Revenue Board - The powers and functions of the 
NaRA shall be exercised by the Internal Reventle Board, hereinafter referred to as the 
Board, composed of seven (7) members appointed by the President oi the Philippines. 
The seven (7) members are: 
The Secretary of Finance who shall be the Chairperson of the Board. 
Whenever the Secretary of Finance is unable to attend a meeting of the 
Board, he/she shall designate an Undersecretary in his Department to act 
as his alternate: Provided, That in such event, the Board shall designate one 
of its members as acting Chairperson; 
Secretary of Budget and Management; 
Director-General of the National Economic Development Authority, and 
Four (4) members who shall come from the private sector, all of whom 
shall serve full-time: Provided, however, That of the members first 
appointed under this subsection, two (2) shall have a term of six (6) years, 
and the other two (2), three (3) years. 
Whenever the Secretary of Budget and Management and/or Director-General of 
NEDA is unable to attend a meeting of the Board, he/she shall designate an 
Undersecretary in his/her Departqent to attend as his/her alternate; 
No member of the Board may be reappointed more than once. 
During the entire period that an individual appointed under this section is a 
member of the Board, such individual shall be treated as serving as a public official or 
employee referred to in Republic Act No. 6713 (R.A. No. 6713), otherwise known as the 
“Code of Conduct and Ethical Standards for Public Officials and Employees.” 
SEC. 9. Vacancy. - Any vacancy on the Board shall be filled in the same manner as 
the original appointment: Provided, however, That any member appointed to fill a 
vacancy occurring before the expiration of the term for which the member’s predecessor 
was appointed shall be appointed for the remainder of the term. 
SEC. 10. Qualtjications. - Members of the Board shall be appointed without regard 
to political affiliation and solely on the basis of their professional experience and 
expertise in one or more of the following areas: 
(a) 
Management of large service organizations 
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(b) 
Customer service 
(c) 
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Fiscal policy 
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Public finance 
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Information technology 
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Organization development 
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Taxation, including tax administration and compliance 
The needs and concerns of taxpayers 
The needs and concerns of small businesses 
In the aggregate, the members of the Board described above shall collectively 
bring to bear expertise in all of the areas herein enumerated. 
SEC. 11. Disquul@cutions. - In addition to the disqualifications imposed by R.A. 
No. 6713, no director, officer, employee, consultant, external auditor, accountant, or 
legal counsel agent or stockholder or in any other capacity of any individual, general 
professional partnerships, professional corporations or any private company or 
enterprises belonging to the top one five hundred (500) corporations in the country, as 
determined by the Securities and Exchange Commission (SEC), shall be eligible for 
appointment as member of the Board within two (2) years from his/her retirement, 
resignation, or separation therefrom. 
Likewise, no member of the Board shall be employed in any such institution 
mentioned in the preceding paragraph within two (2) years after the expiration of 
his/her term except when he/she serves as an official representative of the Government 
to such institution. 
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SEC. 12. Removal. - Any member of the Board appointed under this Act may be 
removed at the will of the President of the Philippines. 
SEC. 13. Meetings. - The Board shall meet at least twice a month. The Board may 
be called to a meeting by the chairperson or by four (4) other members of the Board. 
The presence of four (4) members shall constitute a quorum: Provided, That in,all 
cases the chairperson or the chairperson’s duly designated alternate shall be among the 
four (4). 
All decisions of the Board shall require the concurrence of at least four (4) 
members. 
The NaRA shall maintain and preserve a complete record of the proceedings of 
the Board, including the tapes and transcripts of the stenographic notes, either in their 
original form, in microfilm, or in any electronic medium. 
The records of the 
proceedings of the Board shall be made available to the public in accordance with the 
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rules and regulations that tfie Board may adopt, except the records of proceedings 
where data identifiable with the returns and tax records of specific taxpayers or are 
otherwise considered confidential by the National Internal Revenue Code, hereinafter 
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referred to as the Code, are discussed. 
SEC. 14. Salary. - The salary of the four members from the private sector shall be 
fixed by the President of the Philippines at a sum commensurate to the importance and 
responsibility attached to the position. Each ex officio member shall receive a per diem of 
Two Thousand Pesos (@2,000.00) for every meeting of the Board attended: Provided, 
That per diems of each ex oficio member shall not exceed Eight Thousand Pesos 
(R,OOO.OO) 
per month regardless of the number of Board meetings attended: Provided, 
further, That the rate for per diems may be increased by the Board but no suchincrease 
shall be made within two (2) years from the passage of this Act and within two (2) years 
from the last increase. 
SEC. 15. Powers of the Internal Revenue Bourd. - In the exercise of its authority, the 
Board shall: 
(a) Issue rules and regulations it considers necessary for the effective discharge 
of the responsibilities and exercise of the powers vested upon the Board and 
the NaRA. The rules and regulations issued shall be reported to the President 
and the Congress within fifteen (15) days from the date of their issuance; 
(b) Upon the recommendation of the CEO, approve the annual and supplemental 
budget of receipts and expenditures of the NaRA, and authorize such 
operating and capital expenditures of the NaRA as may be necessary or 
proper for the effective management, operation and administration of the 
NaRA; 
(c) Form committees, including an executive committee, that shall assist the 
Board in the performance of its functions; 
(d) Appoint, upon the recommendation of the CEO, top management officials of 
the NaRA down to the third highest level; 
(e) Establish a compensation plan for the NaRA. The compensation plan shall be 
subject to periodic review by the Board no more than once every two (2) years 
without prejudice to yearly merit reviews or increases based on productivity 
,and efficiency; and 
(f) Exercise such powers and perform such other acts, as may be necessary, 
useful, incidental or auxiliary to carry out the provisions of this Act, or to 
perform the purposes and objectives of this Act. 
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All references in the Code and other revenue laws, and in the rules and 
regulations issued thereunder, to the Secretary of Finance shall be deemed to refer to 
the Internal Revenue Board. 
Article 111 
THE CHIEF EXECUTIVE OFFICER 
SEC. 16. The Chief Executive Oficer; Qualifications; Appointment; Term of Ofice. - 
The NaRA shall be headed by a Chief Executive Officer, hereinafter referred to as CEO, 
who shall be a citizen of the Philippines, of good moral character, known for honesty 
and patriotism, of unquestionable integrity, with at least seven (7) years experience in 
management, and a recognized expert in the field of taxation, finance, fiscal 
administration, economics, public administration or public finance. 
The President of the Philippines shall appoint for a term of four (4) years the 
CEO of the NaRA, upon the recommendation of the Board Provided, That the 
incumbent Commissioner of the BIR as of the date of the approval of this Act shall not 
be qualified to serve as CEO of the NaRA except in a holdover capacity pending the 
appointment of the CEO. The CEO shall enter into a performance contract with the 
Board and may be re-appointed depending on the CEO% performance: Provided, 
however, That no person may be appointed as CEO for more than three (3) terms. In 
addition to other grounds for removal as may be provided for by law, the CEO may be 
removed by a majority vote of all the members of the Board prior to the end of the 
CEO's 3-year term for failure to meet commitments in the performance contract, unless 
such failure is attributable to a cause or causes beyond the CEO's control. 
SEC. 17. Powers and Functions of the CEO. - The CEO of the NaRA shall exercise 
the powers and functions of the Commissioner of Internal Revenue under Sections 4,5, 
6, 7, 8, 14, 15, 16, 17, 19, 20, and other provisions of the Code: In addition, the CEO 
shall: 
(a) Execute, administer and implement the policies and measures approved by 
the Board, and ensure that tax laws are enforced with the highest degree of 
integrity; 
(b) Direct and supervise the operations and administration of the NaRA; 
(c) Represent the NaRA in all dealings with offices, agencies and 
instrumentalities of the Government and with all persons and entities, public 
or private, domestic or foreign; 
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(d) Direct and supervise the preparation of the agenda for the meeting of the 
Board, and to submit for the consideration of the Board such policies and 
measures as he or she believes necessary to carry out the purposes and 
objec L ives of this Act; 
(e) Promulgate, with the approval of the Board, all necessary rules and 
regulations for the effective enforcement of the provisions of the Code, this 
Act and other revenue laws; 
(f) Determine, with the approval of the Board, the organizational structure based 
along functional lines, including the geographical location of the branches 
and offices, of the NaRA; reorganize its personnel; and issue such rules and 
regulations, as he or she may deem necessary or convenient for these 
purposes; 
(g) Establish, with the approval of the Board, a performance-based management 
system which shall govern the selection, hiring, appointment, transfer, 
promotion, or dismissal of all personnel. Such system shall aim to attract 
and retain professionally competent, well-trained, honest, courteous and 
efficient personnel and to establish professionalism and excellence at all levels 
of the NaRA. 
All positions in the NaRA shall be governed by a compensation and position 
classification system and qualification standards approved by the Board 
based on a comprehensive job analysis and audit of actual duties and 
responsibilities. 
(h) Appoint, fix the remuneration and other emoluments, and remove personnel 
of the NaRA in accordance with civil service rules and regulations: Provided, 
That the Board shall have final appellate authority in cases involving 
promotion, transfer, assignment, or reassignment of personnel of the NaRA 
and these personnel actions are deemed made in the interest of the service 
and not disciplinary; 
(i) Maintain a provident fund which consists of contributions made by both the 
NaRA and its officials and employees or their heirs under such terms and 
conditions as it may prescribe; 
(i) Provide for the continuing education and training of NaRA officials and 
employees. For this purpose, the NaRA may establish a training institute or 
enter into agreements with institutions of higher learning in the country for 
the establishment of training programs for its technical personnel in the field 
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of taxation, tax administration, information technology, and related fields. 
The NaRA is likewise authorized to defray the costs of study, at home or 
abroad, of qualified employees of the NaRA, of promising university 
graduates or of any other qualified persons who shall be determined by 
proper competitive examinations; 
(k) Adopt, with the approval of the Board, a Workforce Rationalization Plan, 
including the provision of incentives and/or financial assistance to NaRA 
personnel who retire or are separated from the service as a consequence of 
such Plan; 
(1) Provide the Secretary of Finance with revenue estimates on existing and 
proposed tax laws; 
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Establish and implement a written code of conduct for all employees in 
the NaRA; and 
(n) Exercise such other powers and functions as may be vested in the CEO by the 
Board. 
The CEO shall have the NaRA to delegate any of the foregoing powers in such 
official or officials of the NaRA, as he or she deems necessary. 
All references in the Code and other revenue laws, and in the rules and 
regulations issued thereunder, to the Commissioner of Internal Revenue shall be 
deemed to refer to the CEO. 
SEC. 18. Salary of the CEO. - The Board shall fix the salary of the CEO based on an 
objective classification system to be specified in the Implementing Rules and 
Regulations of this Act at a sum commensurate to the importance and responsibilities 
attached to the position. 
Article IV 
GENERAL PROVISIONS 
SEC. 19. Indemnifkation joy Legul Defense Costs and Expenses - Section 227 of the 
Code is hereby amended to read as follows: 
“SEC. 227. [Sutisfuction of Judgment Recovered Against any Internal Revenue 
Oficer. -When an action is brought against any Internal Revenue officer to 
recover damages by reason of any act done in the performance of official duty, 
and the Commissioner is notified of such action in time to make defense against 
the same, through the Solicitor General, any judgment, damages or costs 
recovered in such action shall be satisfied by the Commissioner, upon approval 
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of the Secretary of Finance, or if the same be paid by the person used shall be 
repaid or reimbursed to him. 
"No such judgment, damages, or costs shall be paid or reimbursed in 
behalf of a person who has acted negligently or in bad faith, or with willful 
oppression.] 
"THE NATIONAL 
REVENUE AUTHORITY 
(NARA) SHALL INDEMNIFY MEMBERS 
OF THE INTERNAL REVENUE 
BOARD AND OTHER OFFICIALS OF THE NARA, INCLUDING 
PERSONNEL OF THE UNITS PERFORMING ASSESSMENT, AUDIT AND COLLECTION 
FUNCTIONS, AGAINST ALL COSTS AND EXPENSES REASONABLY INCURRED BY SUCH 
PERSONS IN CONNECTION WITH ANY CIVIL OR CRIMINAL ACTION, SUIT OR PROCEEDING 
TO WHICH THEY MAY BE OR MADE A PARTY BY REASON OF THEIR PERFORMANCE OF 
THEIR FUNCTIONS OR DUTIES, UNLESS THEY ARE FINALLY ADJUDGED IN SUCH ACTION 
OR PROCEEDING TO BE LIABLE FOR GROSS NEGLIGENCE OR MISCONDUCT. 
"IN THE EVENT OF SETTLEMENT OR COMPROMISE, INDEMNIFICATION SHALL BE 
PROVIDED ONLY IN CONNECTION WITH SUCH MATTERS COVERED BY THE SETTLEMENT 
AS TO WHICH THE NARA IS ADVISED BY EXTERNAL COUNSEL THAT THE PERSONS TO BE 
INDEMNIFIED DID NOT COMMIT ANY GROSS NEGLIGENCE OR MISCONDUCT. 
"THE COSTS AND EXPENSES INCURRED IN DEFENDING THE AFOREMENTIONED 
ACTION, SUIT OR PROCEEDING MAY BE PAID BY THE NARA IN ADVANCE OF THE FINAL 
DISPOSITION OF SUCH ACTION, SUIT OR PROCEEDING UPON RECEIPT OF AN 
UNDERTAKING BY OR ON BEHALF OF THE MEMBER OF THE INTERNAL 
REVENUE BOARD, 
OFFICIAL OR EMPLOYEE TO REPAY THE AMOUNT ADVANCED SHOULD IT ULTIMATELY BE 
DETERMINED BY THE NARA THAT SAID MEMBER OF THE INTERNAL REVENUE BOARD, 
OFFICIAL OR EMPLOYEE Is NOT ENTITLED TO BE INDEMNIFIED AS PROVIDED IN THIS 
SECTION." 
SEC. 20. Implementing Details. - The NaRA shall be made operational by the 
performance of the following acts: 
(a) The President shall constitute the Board by appointing the members thereof 
within one hundred eighty (180) days from the effectivity of this Act; and 
(b) The completion of the transfer of such assets of the NaRA as provided in the 
succeeding Section. 
SEC. 21. Transfer of Assets. - (a) Upon the effectivity of this Act, a Committee 
composed of the Chairperson and ex oficm members of the Board and the Chairpersons 
of the Committees on Ways and Means of the Senate and the House of Representatives 
shall determine the assets of the BIR which shall be transferred to the NaRA. Only such 
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assets whose value, in addition to the initial service fee for the NaRA as indicated in the 
proviso to the second sentence of Section 7 of this Act, is needed to complete the total 
capitalization of the NaRA shall be transferred. The Committee shall be assisted by the 
Commission on Audit (COA) in the appraisal of the value of the assets to be transferred 
to the NaRA. The Chairperson of COA shall assign a group of auditors to assist the 
Committee in its work. 
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(b) The Committee shall complete its work within ninety (90) days from the 
commencement of its work. It shall submit a comprehensive report of its findings and 
justifications to Congress and the President within fifteen (15) days from the completion 
of its work. 
SEC. 22. Transition Provisions. - (a) The NaRA shall be organized by the Board, 
by adopting if it so desires, an entirely new organizational structure or staffing pattern 
to suit the operations of the NaRA under this Act. Selection of NaRA personnel shall be 
based strictly on merit and fitness and applicants may likewise be subject to lifestyle 
checks to ensure their suitability for appointment to the new organization. The 
formulation of the program of organization shall be completed within six (6) months 
after the effectivity of this Act, and shall be fully implemented within a period of six (6) 
months thereafter, both of which periods shall be collectively referred to as the 
transition period. 
(b) Personnel of the BIR at the time of the approval of this Act who apply for 
positions in the NaRA shall enjoy preferential absorption into the new organization. 
For the purposes of this provision, ”preferential absorption” means that BIR personnel 
who meet the new qualification standards and selection criteria shall enjoy priority in 
the hiring of personnel for the NaRA. Those who cannot be absorbed due to either the 
inability to meet the qualification standards and selection criteria or the non-existence of 
a suitable position in the NaRA shall be deemed separated from the service. 
(c) Subject to the preceding paragraph and to minimize the disruption of internal 
revenue administration during the transition period, all incumbent personnel in the BIR 
as of the date of the approval of this Act shall continue to exercise their duties and 
functions as personnel of the NaRA. To help ensure that revenue targets are met during 
the same period, and in addition to the provisions of Section 285 of the Code, an 
additional amount equivalent to five percent (5%) of the excess in collection targets for 
the said period shall be used to pay separation benefits authorized under the 
succeeding Section and shall likewise be treated as receipts appropriated for this 
purpose. Towards the same end, the hiring of auditors, suspension of assessments, 
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institution of voluntary assessment programs, conduct of a taxpayer census, and similar 
measures are hereby authorized during the transition period to augment revenue 
collection. 
(d) 
The Secretary of Finance shall create a transitibn committee to manage the 
organization of the Authority, including the initial selection and appointment of 
Authority officials subject to confirmation once the Board has been constituted. The 
committee shall likewise consider the issues of job descriptions and specifications, 
hiring criteria and methods, job grading and compensation, staffing levels, training, 
performance evaluations, codes of conduct, and disciplinary and grievance handling 
procedures. The committee shall be headed by an Undersecretary of the Department of 
Finance and include, among others, the incumbent Commissioner of the BIR. 
SEC. 23. Separation Benefits. - The national government is hereby authorized to 
provide separation incentives, the details and mechanics of which are to be specified in 
the implementing rules and regulations of this Act, and all those who shall retire or be 
separated from the service on account of the organization under the preceding Section 
shall be entitled to such incentives, which shall be in addition to all gratuities and 
benefits to which they may be entitled under existing laws. 
SEC. 24. Transfer of Powers. - All powers, duties and functions vested by law in 
the BIR shall be deemed transferred to the NaRA. The powers, duties and functions 
vested by the Code and other revenue laws in the Deputy Commissioners, Service 
Chiefs, Assistant Service Chiefs, Revenue Regional Directors, Assistant Revenue 
Regional Directors, Chiefs and Assistant Chiefs of Divisions, Revenue District Officers, 
special deputies of the Commissioner, internal revebue officers and other employees of 
the BIR shall be deemed transferred to the officers and employees of the NaRA who are 
appointed to exercise the same powers, duties and functions as the abovementioned 
BIR officers and employees: Provided, however, That pursuant to the power of the CEO to 
determine the organizational structure of the NaRA and to reorganize its personnel 
under Section 15 of this Act, the positions and bodies mentioned in Sections 7,9,10,11, 
13, 14, 15, 51(B), %(A), 77(A), 81, 90(D), 95, 103(B), 114(B), 128(B), 130(A)(3), 
130(A)(4)(b), 163, 164, 166, 171, 172, 196, 200(C), 202, 204, 206, 207(A), 207(B), 209,213, 
214,215,227,236(A), 236(B), 236(E), 236(F), 236(G), 236(J), 241,242,245(a), 245(e), 245(j), 
248, and 271 of the Code may be changed, abolished, combined with another position or 
body, or substituted with another and the powers and functions granted by these 
provisions to said positions and bodies may be performed by such officials or 
employees deemed appropriate by the CEO Provided, further, That for purposes of 
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applications for abatement, cancellation, and compromise under Section 204 of the 
Code, the Board shall be authorized to fix the terms and conditions, including the levels 
of approving NaRA and the creation of committees to process said applications. 
All references to the BIR in the Code and other revenue laws, and in the rules 
and regulations issued thereunder shall be deemed to refer to the NaRA. 
SEC. 25. Applicability of Prohibitions and Sanctions; Administrative Complaints. - 
The penalties imposed on officials, agents or employees of the BIR who are guilty of the 
offenses enumerated in the Code and other criminal statutes shall be applied to 
members of the Board and officials, agents and employees of the NaRA who are found 
guilty of such offenses. 
For purposes of administrative complaints against officers and employees of the 
NaRA, an internal audit unit to be created by and reporting directly to the Board shall 
conduct the investigations on such complaints. For this purpose, such internal audit 
unit shall be deemed deputized by the Office of the Ombudsman under Republic Act 
No. 6770. 
SEC. 26. Implementing Rules and Regulations. - The Board shall promulgate the 
implementing rules and regulations for this Act within sixty (60) days from its 
constitution. Failure to promulgate such rules and regulations shall not affect the 
implementation of the self-executory provisions of this Act. 
SEC. 27. Repealing Clause. - The provisions of Sections 18, 19, 20, 21, and 22 of 
Chapter 4, Title 11, Book IV of Executive Order No. 292, otherwise known as the 
Administrative Code of 1987, are hereby repealed. The provisions of Title I of the Code 
insofar as they are inconsistent with the provisions of this Act are hereby repealed or 
amended accordingly. The other provisions of the Code, including Sections 51(B), 
58(A), 77(A), 81, 90(D), 95, lq3(B), 114(B), 128(B), 130(A)(3), 130(A)(4)(b), 163, 164, 166, 
l71,172,196,200(C), 202,204,206,207(A), 207(B), 209,213,214,215,227,236(A), 236(B), 
236(E), 236(F), 236(G), 236(J), 241,242,245(a), 245(e), 245(j), 248,271, and 285 are hereby 
amended, and those of other laws, rules and regulations inconsistent with this Act are 
hereby repealed or modified accordingly. 
SEC. 28. Separability Clause, - If any provision or section of this Act is held 
invalid, the other provisions and sections not affected thereby shall remain in full force 
and effect. 
SEC. 29. Effectivity Clause. - This Act shall take effect fifteen (15) days following 
its publication in the Official Gazette or in two (2) newspapers of general circulation. 
Approved, 
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