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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Seventeenth Congress
First Regular Session

House Bill No49'73

Introduced by REPRESENTATIVE PANTALEON D. ALVAREZ and
REPRESENTATIVE DAKILA CARLO E. CUA

EXPLANATORY NOTE

As the country’s revenue-generating arm, the Bureau of Internal
Revenue is charged with the assessment and collection of more than three-
fourths (3/4) of the money the government spends to provide for education,
healthcare, infrastructure, and national defense to its citizens, and 100% of
the internal revenue allotment that each local government unit receives.

The importance of keeping tax administrators competitive, professional
and with utmost integrity cannot be highlighted enough. Effective human
resources management is a key requirement for tax administrations where
people are the most important enablers to carry out their main mandate,
which is to collect tax revenue'. At present, the Bureau is beset with
complaints of revenuers who are unprofessional, without professional
initiative, lack institutional knowledge and worse, engaged in corrupt
practices. Underpaid and overworked, new recruits leave the Bureau after a
year or two in search of a more competitive salary and well-planned career-
pathing. The present structure for position and compensation classification
in the Bureau, rather than support a culture of service, integrity and progress,
serve as hindrance to its own growth and performance.

It must be remembered that the desired objectives of tax policy can only
be achieved when it is properly administered. It should thus be the primary
objective of the government to introduce appropriate legislation to eliminate
corruption and professionalize the ranks of revenuers, recognize the nature
of tax administration as a highly-technical and specialized field, and provide
for whatever means necessary to ensure that revenuers are protected against
the risk that comes with revenue collection and in handling amounts of money
well beyond the revenuers’ pay.

+ Asian Development Bank. A comparative analysis of tax administration in Asia and the Pacific
Mandaluyong City, Philippines: Asian Development Bank, 2014.


This legislative measure aims at addressing these concems through the
removal of the BIR from the coverage of Republic Act No. 6758 otherwise
known as the “Compensation and Position Classification Act of 1989”, or the
“Salary Standardization Law”. Allowing the Bureau to formulate its own
position classification and compensation system shall result in the following:

Elimination of Corruption of Need

Systemic corruption is a perennial issue that hounds the Bureau. Time
and again, the Bureau, the Office of the Ombudsman and the Civil Service
Commission have filed criminal and administrative cases against erring
officials and employees under Republic Act No. 3019, as amended, as a knee-
jerk reaction to complaints of taxpayers. However, for true reform to happen,
corruption should be addressed at its roots—low salaries and lack of
incentives that target the need of BIR personnel. If wages are too low for
revenuers to support themselves and their dependents, the more likely they
are to engage in corrupt behavior.

It is always preferable to focus on prevention through the building of
integrity through positive and pro-active preventive approach.? The key in
avoiding corruption is to design a personnel incentives structure to motivate
revenue officers to act in the interest of the Bureau rather than his or her own
interest®. Thus, revenuers should receive compensation that grants them
financial security and dignity to resist the temptation to be corrupted.

Encouraging Employment and Retaining Personnel

Recruiting and retaining high-performing employees is a major
challenge for tax authorities. Salary grades (SG) in the Bureau range from SG
1 to 30. For lawyers and accountants, the entry levels are set at SG 18
(Attorney Il) and SG 11 (Revenue Officer I}. While salaries for both entry-level
lawyers and accountants may be said to be at par with private sector rates,
the room for career growth is lacking. Promotion to Attorney III and higher
Revenue Officer positions is limited due to the small number of plantilla
positions available. For lawyers who have been promoted to Attorney III, they
may only be given promotions if they become Assistant Chiefs (Attorney IV) or
Chiefs (Attorney V) of divisions. As a result, in recent years, there has been a
steady outflow of professionals and technical personnel in the Bureau.

Low salary and the lack of items for professional growth disincentivizes
work in the Bureau. Recruiting and retaining high-performing employees is a
key challenge for organizations. Granting the Bureau power to formulate its
own compensation and position classification system would allow it flexibility
to employ the best-of-the-best human resource available, and retain talent
within its ranks.

2 Global Programme Against Corruption Prevention: An Effective Tool to Reduce Corruption. Vienna:;
United Nations Office for Drug Control and Crime Prevention, 1999.

3 Asher, M.G. 2002. The Design of Tax Systems and Corruption. Singapore: National University of
Singapore.


Recognition that Tax Administration is a Technical and Specialized Field

For tax administration to be efficient, effective and at par with the legal
and accounting teams in the private sector, high-caliber professionals as well
as first-rate technical and support staff trained in the intricacies of taxation
must comprise its workforce.

‘Tax leakages from complex domestic transactions and the sophisticated
international tax avoidance measures among multi-national companies can
only be plugged if the Bureau is staffed with experts and professional
examiners. Recognizing the premium of technical experts in their employ, the
governments of Japan, Malaysia, and Singapore have been paying the highest
wages to their revenue employees.

With a competitive salary and incentive package, the Bureau may be
able to employ and retain personnel of high-caliber without fear of
organizational “brain drain” to the private sector, or any capacity-building
investment going to waste.

Protection of Bureau Personnel from Risks

One aspect of tax administration that recent administration have not
focused on is the fact that BIR personnel face occupational hazards in the
performance of their function. Revenue officers on premise (ROOPs) manning
mines and production plants; revenue collection officer who travel from one
locality to another to afford access to taxpayers in far-flung areas to pay their
taxes; and even revenue examiners in conflict areas whoa are threatened by
armed men, are some of the Bureau’s unsung heroes. In recent years, a
number of BIR personnel have also been the target of ambush attempts and
death threats. To recognize the danger that revenuers face by providing for
institutionalized hazard pay and insurance will allow these personnel a sense
of security in performing their mandate.

Better Taxpayer Service

As front-line personnel, revenuers are expected to attend to taxpayers’
every need. However, the allocation of revenue officers vis-a-vis the number
of taxpayers they cater to is largely disproportionate. Also, with a salary
viewed as inequitable, most revenuers have also adopted the culture of no
longer performing essential functions “well-beyond their pay grade”. This
representation believes that a competitive salary and incentive package for
revenue personnel equates to deeper commitment to the Bureau and the
taxpaying public, greater accountability and higher quality of service. The
increases in salary and the grant of incentives being merit-based, revenuers
shall be pushed to perform and give the standard of service that taxpayers
truly deserve.



For the above reasons, it is imperative that the Government support
this initiative for capacitating and strengthening BIR personnel. In light of
this, it is proposed that the Bureau of Internal Revenue, as the foremost
revenue generating arm of the government, be removed from the coverage of
Republic Act No. 6758 otherwise known as the “Compensation and Position
Classification Act of 1989”, or the “Salary Standardization Law”.

This is the House counterpart of the Bill filed by Sen. Aquilino “Koko”

Pimentel III.

PANTALEON D.’ALV; Z

D. ‘CARLO E. CUA


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Seventeenth Congress
First Regular Session

House Bill No. 4973

Introduced by REPRESENTATIVE PANTALEON D. ALVAREZ and
REPRESENTATIVE DAKILA CARLO E. CUA

AN ACT EXEMPTING THE BUREAU OF INTERNAL REVENUE
FROM THE COVERAGE OF REPUBLIC ACT NO. 6758,
OTHERWISE KNOWN AS THE SALARY STANDARDIZATION LAW,
AS AMENDED, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the
Philippines in Congress assembled:

SECTIONL. Declaration of Policy. - It is the policy of the State to reform tax
administration and ensure efficient and effective collection of taxes by
employing and maintaining competent and professional revenue officials and
personnel to collect taxes and enforce internal revenue tax laws. Towards this
end, the State shall exempt the Bureau of Internal Revenue (BIR) and its
employees from the coverage of Republic Act No. 6758, otherwise known as
the Salary Standardization Law, as amended.

SEC. 2. Exemption from Salary Standardization. - The BIR and its employees
shall be exempt from the coverage of the Salary Standardization Law.

‘The BIR is hereby authorized to formulate its own Compensation and
Position Classification System based on the following principles:

(a) BIR personnel shall be paid just and equitable wages in accordance
with the principle of equal pay for work of equal value;

(b) Basic compensation for BIR personnel shall generally be comparable
with those in the private sector doing comparable work and must be in
accordance with prevailing laws on minimum wages;

(c) The BIR Compensation and Position Classification System shall be
determined through a comprehensive analysis and audit of actual duties and
responsibilities of the Bureau’s officials and employees;


(d) A review of government compensation rates, taking into account the
performance of the Bureau, its overall contribution to the national economy,
and the possible erosion in purchasing power due to inflation and other
factors, shall be conducted periodically;

SEC. 3. Incentives to Bureau Officials and Personnel, - The Bureau, subject to
the approval of the President, may provide for other incentives not provided
under existing laws and Civil Service laws.

SEC. 4. Approval of the President. - The BIR Compensation and Position
Classification System implemented pursuant to this Act shall be approved by
the President, and shall be subject to periodic review by the BIR, in
consultation with the Department of Budget and Management (DBM),
Department of Finance (DoF) and the Civil Service Commission (CSC), not
more than once every three (3) years, without prejudice to yearly merit reviews
or increases based on performance.

SEC. 5. Non-diminution of Salaries. - The BIR Compensation and Position
Classification System to be developed and recommended by the BIR, as
approved by the President, shall apply to all positions, on full or part-time
basis, now existing or hereafter created: Provided, That in no case shall there
be any diminution in the authorized salaries of incumbent employees of the
BIR as of December 31, 2016, upon the implementation of the approved BIR
Compensation and Position Classification System.

SEC. 6. Appropriation Clause. - The amount necessary to implement this Act
shall be included in the General Appropriations Act of the year following its
enactment into law.

SEC. 7. Separability Clause. - If any of the sections or provisions of this Act is
held invalid, ‘all other provisions not affected thereby shall remain valid.

SEC. 8. Repealing Clause. - All laws, decrees, issuances, rules and regulations
inconsistent with the provisions of this Act are hereby repealed or modified
accordingly.

SEC. 9. Effectivity Clause. - This Act shall take effect fifteen (15) days after its
complete publication in at least two (2) newspapers of general circulation.