Document of

The World Bank

Report No: 65798-PH

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING

OF

NATIONAL PROGRAM SUPPORT FOR TAX ADMINISTRATION REFORM LOAN L7431-PH

Approved by the Board on March 13, 2007

TO THE

REPUBLIC OF THE PHILIPPINES

December 19, 2011

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ABREVIATIONS AND ACRONYMS

ARCS Accounts Receivable Conversion System BIR CIT

Bureau of Internal Revenue Corporate Income Tax

eLAMS Electronic Letter of Authority Monitoring System EAccReg Electronic Accreditation & Registration eSales Electronic Sales Reporting System GIS Geographical Information System HRIS Human Resource Information System HRDS Human Resource Development Service ISG Information Systems Group KPI Key Performance Indicators LTS Large Taxpayers Service MANCOM Management Committee NPSTAR National Program Support for Tax Administration

Reform OG Operations Group ORB PIT

Official Register Books Personal Income Tax

PPS Policy and Planning Service RATE Run After Tax Evaders TRAG Tax Reform Administration Group

Regional Vice President: James W. Adams Acting Country Director: Chiyo Kanda

Acting Sector Manager / Director: Rogier Van den Brink Task Team Leader: Rosa Maria Alonso Terme

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PHILIPPINES

NATIONAL PROGRAM SUPPORT FOR TAX ADMINISTRATION REFORM

P101964 TABLE OFCONTENTS

Page

A. ABBREVIATIONS AND ACRONYMS................................................................. 23 B. SUMMARY.............................................................................................................. 45 C. PROJECT STATUS.................................................................................................. 45 D. PROPOSED CHANGES ...................................................................................... 1112 E. APPRAISAL SUMMARY ................................................................................... 1314

� Annex 1 Arrangements for Results Monitoring.................................................... 1819

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PHILIPPINES NATIONAL PROGRAM SUPPORT FOR TAX

ADMINISTRATION REFORM.

RESTRUCTURING PAPER

SUMMARY

This Restructuring Paper (RP) introduces changes to the National Program Support

for Tax Administration Reform (NPSTAR) Project Appraisal Document (PAD) and its accompanying legal document: loan agreement L7431-PH. The proposed changes are to: i) include the revised results matrix with revised/reformulated project indicators and targets; and ii) extend the closing date from December 31, 2011 to June 30, 2013. The revision of some of the project indicators is to ensure that the performance of project interventions is properly captured by relevant and available data sources (please see section C below).

PROJECT STATUS

During the first years of project implementation, progress in tax administration

reform was slow, in part due to frequent turnover in commissioners and an unsupportive political environment. In mid-2009, project disbursements began to pick up and they have accelerated substantially since a new administration took over in July 2010. A total of US$1.58 million had been disbursed by end-2010. Twenty procurement packages have been procured or are in the process of being contracted by end of December 2011. The estimated cost of the 20 packages is US$5.7 million.

Currently, actual disbursements stand at US$ 3.28 million. However, adding the disbursed amount as of the end of 2010 and the contracted amount by end of 2011, the total of disbursements and commitments as of end-December 2011 is projected to be US$7.28 million, amounting to 66 percent of the loan amount of US$11 million. The remaining uncommitted amount for the proposed extension period up to June 2013 would be about US$3.72 million or 34 percent of the loan amount. The team is satisfied with the performance of the BIR procurement system and is confident that it will be able to complete the remaining packages as enumerated in the revised procurement plan projected to June 2013 (see below). The project components remain as they were: a) tax compliance; b) tax enforcement and control; c) human resource development and management; and d) BIR management, change management and project management. Improvements in all these four dimensions are needed and the activities to be funded from NPSTAR should contribute to the achievement of the project’s development objective of improving

5

compliance by enhancing the efficiency and effectiveness of BIR. For a list of activities projects to be funded, please see Table 1 below.

6

Table 1: Description of Activities

Project Description/Rationale Related Strategic Plan

Objective/Program

Professional Services

A. TAX COMPLIANCE

ITS Database Consolidation

Consolidation of the existing ITS databases into a single database wherein duplicate/redundant codes and registration records were eliminated

Strategic Objective #3: Strengthen Good Governance - Continued expansion of BIR Information Technology capabilities and effective use of third party data

Systems Enhancement and Integration of the Electronic Accreditation & Registration (eAccReg) System and Electronic Sales Reporting System (eSales)

eAccReg aims to simplify the process of accreditation/registration and issuance of permits for the use of sales machines and sales receipting system software such as cash register machines/point of sale (CRM/POS) connected to the Computerized Accounting System, stand alone CRM/POS eSales is the electronic process of enrolling and reporting the gross monthly sales of business taxpayers using the CRM/POS or any similar devices through 3 channels: SMS, email or web

Strategic Objective #3: Strengthen Good Governance - Continued expansion of BIR Information Technology capabilities and effective use of third party data

Geographical Information System (GIS) for Tax System (Pilot - Phase I)

Geographical Information System for Tax System is the system that captures, stores, analyzes, manages and presents taxpayer data with reference to geographic location data use for Taxpayer Mapping

Strategic Objective #3: Strengthen Good Governance - Continued expansion of BIR Information Technology capabilities and effective use of third party data

Strategic Objective #4: Improve assistance, compliance and enforcement process - TP electronic folder which includes TP ledger and records of all other transactions with the BIR

Procurement of Consultancy Services for the Redesign of Tax Forms

Combined Procurement of Consultancy Services for Forms Enhancement (1700, 1701 & 1702) with Procurement of Consultancy Services for the Re-

Strategic Objective #2: Improved taxpayer satisfaction and compliance - Continue to redesign tax forms to make it easier for taxpayers to comply with reporting

7

Project Description/Rationale Related Strategic Plan

Objective/Program

designing of other forms (monthly & quarterly)

requirements Strategic Objective #4: Improved filing and payment process - Redesign/Simplification of tax returns to reduce burden on taxpayers, without sacrificing necessary information that need to be provided upfront

Procurement of Consultancy Services for Information Security-Implementation and Capacity Building Project

This project deals with the implementation of the information security framework of the BIR and capacity building

Strategic Objective #3: Strengthen Good Governance - Continued expansion of BIR Information Technology capabilities and effective use of third party data

Electronic Official Registry Books (eORB)

Development/Implementation of an automated facility for excise products that will allow excise taxpayers to submit electronically ORB to the Large Taxpayer Performance Monitoring and Programs Division

Strategic Objective #3: Strengthen Good Governance - Continued expansion of BIR Information Technology capabilities and effective use of third party data

B. TAX ENFORCEMENT AND CONTROL

Procurement of Consultancy Services for Project Study on the Re-engineering of the Rulings Process

Project study aims to reduce the time and streamline the process in the finalization of rulings

Strategic Objective #4: Improve assistance, compliance and enforcement process - Improved tax rulings process and management - Process review and streamlining of business processes

Development of the Collection Reconciliation System

Develop data matching modules to reconcile collection data from different sources (Bureau of Treasury, Bangko Sentral ng Pilipinas, Authorized Agent Banks vs. BIR)

Strategic Objective #3: Strengthen Good Governance - Continued expansion of BIR Information Technology capabilities and effective use of third party data

Run After Tax Evaders (RATE) Program - Consultancy Services - Communications Agency

Develop, implement and execute the RATE Communication Plan

Strategic Objective #1: Attained collection targets and sustained collection growth - Continue and further strengthen RATE Program to detect tax fraud cases and take necessary steps to prosecute offenders

BIR Local Internal Audit Advisor

Assists in strengthening BIR internal controls through internal

Strategic Objective #6: Improve integrity, competence,

8

Project Description/Rationale Related Strategic Plan

Objective/Program

audit

professionalism and satisfaction of human resources - Improved integrity of personnel - Develop a strategy for improving internal audit and internal security functions in the BIR

Enhancement of the Accounts Receivable Conversion System (ARCS)

Enhance existing ARCS functionalities, including conduct of training and pilot run

Strategic Objective #3: Strengthen Good Governance - Continued expansion of BIR Information Technology capabilities and effective use of third party data

Strategic Objective #4: Improve assistance, compliance and enforcement process - Improved management of arrears - Design an effective collection enforcement/arrears strategy, considering implications to organization, staffing, training of collection personnel and IT systems

Enhancement of Electronic Letter of Authority Monitoring System (eLAMS)

eLAMS is a web-based facility that aims to manage the issuance of system-generated Letters of Authority as well as automate the monitoring of eLAs across concerned BIR offices in the conduct of its audit function

Strategic Objective #3: Strengthen Good Governance - Continued expansion of BIR Information Technology capabilities and effective use of third party data

C. HUMAN RESOURCE DEVELOPMENT AND MANAGEMENT

Enhancement of Human Resource Information System (HRIS)

Enhancement of the following HRIS modules to maximize system utilization: Organizational management, personnel administration, time management, performance management, eRecruitment, property accountability, forms accountability, library, Training and Events Management, Medical and Dental, Payroll System (new module)

Strategic Objective #3: Strengthen Good Governance - Continued expansion of BIR Information Technology capabilities and effective use of third party data

Strategic Objective #6: Improve integrity, competence, professionalism and satisfaction of human resources -- Improved

9

Project Description/Rationale Related Strategic Plan

Objective/Program

competence, professionalism and satisfaction of human resources - Review of HR management policies and processes and enhancement of the HRIS

D. BIR REFORM, CHANGE MANAGEMENT AND PROJECT MANAGEMENT

Consultancy Services for Manpower Planning

To develop a customized and integrated manpower planning system and assists the BIR in the preparation of a staffing pattern following the manpower planning system

Strategic Objective #6: Improve integrity, competence, professionalism and satisfaction of human resources -- Improved competence, professionalism and satisfaction of human resources - Review of organizational structure at National Office., regions and districts, including manpower complement and staffing pattern

Consultancy Services for Project Management System

Development of a computerized monitoring/tracking system particularly interconnecting the tracking of procurement and contract implementation of various TRAG projects

Strategic Objective #3: Strengthen Good Governance - Implementation of more transparent procurement and financial management procedures

Consultancy Services for a TRAG Consultant and TOR writer (extension)

Assisted the TRAG in project management and preparation of Terms of Reference (TOR)

Consultancy Services for Change Management

Develop and implement change management activities through conduct of change management and communication activities, CM capability buildings and institutionalize CM process

Strategic Objective #3: Strengthen Good Governance - Strategic Planning that continues to drive improvements in BIR operations

Consultancy Services for TOR writer

Assist the BIR in the preparation of TORs in coordination with project proponents

OTHER SERVICES

Design, Layout, Packaging & Printing of the Enhanced Collection Manual

Production of the Enhanced Collection Manual which shall serve as the reference guide for all collection officers nationwide

Strategic Objective #2 - Improved taxpayer satisfaction and compliance - Ensure taxpayers are treated in a uniform and consistent manner (all offices across the country operate in a consistent manner)

10

Project Description/Rationale Related Strategic Plan

Objective/Program

Data Conversion of Rulings Issued for CY 2010

Database build-up of Rulings issued for 2010 shall be scanned and indexed for uploading to the Tax Rulings and Case Management System to form part of the system files. This is to give electronic access for lawyers (Action Attorneys) to previously issued rulings and documents vital for rulings preparation.

Strategic Objective #4: Improve assistance, compliance and enforcement process - Improved tax rulings process and management - Process review and streamlining of business processes

ADVERTISING EXPENSES

Includes public information campaign for the RATE Program, Information materials and mega sale expenses for forfeited properties

GOODS and OTHERS

Common Used Supplies

Estimated 10 packages, each package not exceeding $50,000

Various Equipment (includes additional personal computers to augment resources of the BIR and eDST printers)

These PCs are needed to effectively implement the various ICT Projects funded by NPSTAR, i.e., eAccReg/eSales, GIS, eLAMS, Enhanced HRIS, Tax Rulings and Case Management System. Existing BIR resources are devoted mainly for ITS operations and the obsolete PCs can't handle these new systems; Printers shall be deployed to RDOs to complement the resources for implementation of the existing eDST system nationwide

Software Licenses and Subscription Licenses (Lex Libris, Lexis Nexis and Adobe Photoshop - Office Software and MS Office licenses for the additional PCs)

Needed to fully utilize the PCs

Purchase and Installation of ICT equipment and materials for eLounges

To provide a facility for taxpayers on the free use of BIR eServices; Purchase consists of 5 packages; To be installed in 35 e-

Strategic Objective #4: Improved taxpayer assistance - Expansion of function and capacity of contact center and/or elounges

11

Project Description/Rationale Related Strategic Plan

Objective/Program

Lounges for Metro Manila RDOs; elounges in 5 Metro Manila RDOs are targeted to be rolled-out until December 2011)

Procurement of Software Solution for Tax Rulings and Case Management System

Software solution for Tax Rulings and Case management System with customization/ configuration, migration, integration and installation that is suited to BIR's rulings and case process; This will address the need of the BIR for a system that will monitor and manage the BIR rulings, legal and administrative cases in a centralized data repository

Strategic Objective #4: Improved tax rulings process and management - Tax Rulings Case management System that is capable of tracking and tagging changes including workload management

Books and reference materials

On areas of Tax Administration - NIRC, Project Management, Performance Management, Project Evaluation, Tax Fraud, among others

Trainings and Workshops (includes study visits)

For capability building on areas of Tax Administration, Tax Analysis and Revenue Forecasting, Performance Management; Project Management, Change Management and Management Skills, among others

Communication and postage expenses

For freight of materials/manuals nationwide and for publication expenses

PROPOSED CHANGES

Project Development Objectives

The PDO remains unchanged. It is “to increase taxpayer compliance by increasing the efficiency and effectiveness of the BIR, and to prepare the BIR for a sustainable and long-term reform.”

12

(a) Results/indicators. While the PDO is unchanged, some project indicators are now reformulated to better align to available data sources and incorporate a new agency-level Key Performance Indicators (KPI) on arrears management. Since the project timeline is now extended by additional 18 months, new targets are also included (See Annex 1 for a full list). In particular, the following changes are proposed:

(i) Increase in commonly-shared internal and external expectations of reform

accomplishments has been dropped and substituted with the following data available from BIR taxpayer surveys:

• Percent of respondents who said that BIR services have met their expectations in the ease of conducting transactions (target: 82 percent in 2012 from 79.5 in 2010);

• Percent who said that BIR services have met their expectations in generating satisfying results (target: 87 percent in 2012 up from 85.2 in 2010);

(ii) The target of “80 percent of staff indicates high level awareness and understanding of the reform” has been changed to “90 percent of BIR staff awareness of the projects involved in tax reform;”

(iii) The target of “80 percent of taxpayers have correctly registered” has been changed to “registered taxpayers amount to 47% of the active labor force;”

(iv) The indicator on “increase in the number of stop filer cases arising from erroneous/invalid registration information eliminated from registration database” has been changed to “percentage of filers over total registered taxpayers;”

(v) The (2010) target of “80 percent of taxpayers in database file returns the following year” has been increased to 85 percent for 2012;

(vi) The indicator on outstanding arrears has been supplemented with one on collections in a particular year or “year n” as a percentage of potentially recoverable arrears in the preceding year or “year n-1”(defined as those of three years and less maturity in line with the agency KPI) to improve performance measurement and align with a new agency-level KPI;

(vii) The “increase in the use of output and outcome indicators in internally management reports” has been changed to “use of operational indicators in BIR quarterly reports and of agency-level KPIs in BIR annual report.”

(b) Closing date. The new proposed closing date is June 30, 2013. This is the project’s first extension.

(c) Implementation schedule The Bank and BIR have agreed on an implementation cum procurement plan for the period of the proposed project extension. The plan includes mainly ICT and capacity-building activities. These are fully consistent with the project’s objectives and with BIR’s Strategic Plan (See Table 2 below). Support on institutional change and business process re-engineering will continue being

13

provided through the companion Public Revenue and Expenditure Review. The International Monetary Fund and the Millennium Challenge Corporation are also providing technical assistance to the reform program and the Bank team is working closely with them.

APPRAISAL SUMMARY

In 2011, the Bureau of Internal Revenue (BIR) has adopted a sound medium-term

strategic plan for reform and a set of agency-level key performance indicators conforming to good international practice and covering all phases of the tax compliance cycle as well as overall compliance rates. Because of this as well as an improvement in project and overall reform management and disbursements record, the NPSTAR team upgraded the project rating.

Progress toward the achievement of the project’s development objective is now

moderately satisfactory and progress in project implementation satisfactory. However, most of the progress so far is in reform planning and monitoring systems and in the purchase of ICT packages. On the other hand, changes in BIR human resource management and business processes including internal controls and internal audit have yet to take place.

It is still too early to tell whether the implementation of (politically and

administratively) difficult reforms in regulations, business processes and human resources needed to ensure improved governance and enhanced tax compliance will take place. Similarly, without changes in tax policy, especially in tax incentives, it will be difficult to significantly enhance compliance.

As mentioned above, the proposed activities for the project extension period are

fully in line with BIR’s strategic objectives as well as the project objectives. The ICT packages and other activities included in the loan, however, are only likely to result in substantial progress toward the achievement of project objectives if accompanying management, regulatory changes and business process re-engineering take place.

Therefore, as discussed above, the three conditions for closing date extension are

fulfilled: (a) project objective continues to be achievable; (b) the performance of the borrower and implementing agency is satisfactory; and (c) the borrower has prepared a specific action plan acceptable to the Bank to complete the project (see section C).

The procurement performance of the project is Satisfactory and the 2010 Annual

Procurement Performance Indicators have been submitted and accepted by the Bank. The financial management performance of the project is Moderately Satisfactory and the Bank has received the 2010 Audited Financial Management Report for the project as well as the unaudited Financial Management Report for January through September 2011.

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Table 2. Procurement cum Implementation Plan

National Program Support Tax Administration Reform (NPSTAR)

January 2011-June 2013

Procurement Program Project

Estimated

Budget (Php)

Advertise-

ment for

REOI

Notice of

Award

(Conforme

Date

Notice to

Proceed

(Conforme

Date)

Committed projects under the WB Procurement Cum Implem Plan-Loan Extension from January 2011-June 2013 Jan-Dec.2011 Jan12-Jun13

Professional Services

A. TAX COMPLIANCE

Consultancy Services for ITS Database Consolidation

43,159,260.00 05/25/10 11/19/10 01/05/11 43,159,260.00

Systems Enhancement and Integration of the Electronic Accreditation & Registration (eAccReg) System and Electronic Sales Reporting System (eSales)

23,700,00.00 05/05/11 11/02/11 11/15/11 23,700,000.00

Geographical Information System for Tax System (Pilot-Phase 1)

6,500,000.00 09/30/11 11/15/11 12/01/11 6,500,000.00

Procurement of Consultancy Services for the Redesign of Tax Forms

2,500,000.00 09/22/11 11/02/11 11/15/11 2,500,000.00

Procurement of Consultancy Services for Information Security-Implementation and Capacity Building Project

9,789,400.00 09/16/11 11/02/11 11/15/11 9,789,400.00

Electronic Official Registry Books (eORB) 4,500,000.00 10/07/11 11/15/11 12/01/11 4,500,000.00

B. TAX ENFORCEMENT AND CONTROL

Procurement of Consultancy Services for Project Study on the Re-engineering of the Ruling Process

500,000.00 09/30/11 11/15/11 12/01/11 500,000.00

Development of the Collection Reconciliation System

8,665,000.00 05/02/11 07/05/11 08/31/11 8,665,000.00

Run After Tax Evaders (RATE) Program-Consultancy Services-Communications Agency

1,971,200.00 12/06/10 03/01/11 04/05/11 1,241,856,00 729,344.00

Enhancement of the Accounts Receivable Conversion System (ARCS)

5,080,000.00 05/02/11 07/05/11 08/15/11 5,080,000.00

Enhancement of Electronic Letter of Authority Monitoring System (eLAMS)

4,995,200.00 05/02/11 07/05/11 08/15/11 4,995,200.00

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Procurement Program Project

Estimated

Budget (Php)

Advertise-

ment for

REOI

Notice of

Award

(Conforme

Date

Notice to

Proceed

(Conforme

Date)

Committed projects under the WB Procurement Cum Implem Plan-Loan Extension from January 2011-June 2013 Jan-Dec.2011 Jan12-Jun13

C. HUMAN RESOURCE DEVELOPMENT AND MANAGEMENT

Enhancement of Human Resource Information System (HRIS)

33,970,120.00 08/15/11 12/01/11 12/16/11 33,970,120.00

D. BIR REFORM, CHANGE MANAGEMENT AND PROJECT MANAGEMENT

BIR Local Internal Audit Advisor 5,500,000.00 05/02/11 10/12/11 11/02/11 5,500,000.00

Consultancy Services for Manpower Planning 4,800,000.00 10/15/11 12/01/11 12/16/11 4,800,000.00

Consultancy Services for Project Management System

5,000,000.00 09/30/11 12/01/11 12/16/11 5,000,000.00

Consultancy Services for a TRAG Consultant and TOR writer ( extension)

750,000.00 10/23/10 750,000.00

Consultancy Services for Change Management 13,720,246.19 07/06/09 12/01/09 06/07/10 13,720,246.19

Consultancy Services-TOR Writer 1,892,000.00 1,892,000.00

SUB-TOTAL- Professional Services 176,992,426.19 174,371,082.19 2,621,344.00

OTHER SERVICES

TAX ENFORCEMENT AND CONTROL

Design, Layout, Packaging & Printing of the Enhanced Collection Manual

3,000,000.00 05/02/11 11/02/11 11/15/11 3,000,000.00

Data Conversion of Rulings Issued for CY 2010 1,000,000.00 10/22/11 11/30/11 12/16/11 1,000,000.00

ADVERTISING EXPENSES:

RATE Public information Campaign:

Airtime Cost-Television and Radio (Objective: To instill in the minds of the public that the BIR is a partner in nation-building.)

4,000,000.00 10/17/11-12/30/11

2,500,000.00 1,500,000.00

Publication/Advertisement expenses (Newspaper Advertorials; poster and flyers including online advertisement (e.g. yahoo Philippines.)

2,500,000.00 10/17/11-12/30/11

2,500,000.00

Publicity Campaign Expenses-press conferences, working meetings and other events related to RATE Programs’

1,500,000.00 10/17/11-12/30/11

1,500,000.00

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Procurement Program Project

Estimated

Budget (Php)

Advertise-

ment for

REOI

Notice of

Award

(Conforme

Date

Notice to

Proceed

(Conforme

Date)

Committed projects under the WB Procurement Cum Implem Plan-Loan Extension from January 2011-June 2013 Jan-Dec.2011 Jan12-Jun13

projects and activities

Publicity Campaign Expenses-jingle, newspaper ads, movie, television and radio trailers

4,000,000.00 10/17/11-12/30/11

4,000,000.00

Management of Forfeited

Properties

Information Materials 315,000.00 315,000.00

Mega Sale Expenses 759,727.00 06/01/11-12/30/11

87,920.16 671,806.84

SUB-TOTAL-Other Services 17,074,727.00 9,087,920.16 7,986,806.84

GOODS

Common Uses Supplies (Estimated 10 packages, each package not exceeding $50,000)

3,600,000.00 3,600,000.00

Various Equipment 3,158,000.00 3,158,000.00

Software Licenses and Subscription Licenses (Lex Libris, Lexis Nexis and Adobe Photoshop-Office Software)

1,019,500.00 1,019,500.00

Update of Lex Libris 212,000.00 212,000.00

Purchase and Installation of ICT equipment and materials for eLounges (35e-Lounges for Metro Manila RDOs, 5 packages): Target:5 e-Lounges for 2011

22,429,119.23 22,429,119.23

Procurement of Software Solution for Tax Rulings and Case Management System

33,000,000.00 12/01/11 12/16/11 33,000,000.00

Books and reference materials (On areas of Project Management, Performance

1,810,000.00 1,810,000.00

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Procurement Program Project

Estimated

Budget (Php)

Advertise-

ment for

REOI

Notice of

Award

(Conforme

Date

Notice to

Proceed

(Conforme

Date)

Committed projects under the WB Procurement Cum Implem Plan-Loan Extension from January 2011-June 2013 Jan-Dec.2011 Jan12-Jun13

Management, Project Evaluation, Tax Fraud, among others)

Procurement of additional

personal computers (2,000

units)

PC 50,641,000.00 12/01/11 12/16/11 50,641,000.00

MS Office License 31,887,000.00 12/01/11 12/16/11 31,887,000.00

Procurement of eDST printers ( 133)

1,802,815.00 1,802,815.00

SUB TOTAL-Goods 149,559,434.23 149,559,434.23

OTHERS

Trainings and Workshops (Tax Administration, Tax Analysis and Revenue Forecasting. Performance Management, Change Management, Management skills) including Study Visits

44,456,102.00 6,241,712.27 38,214,389.73

Miscellaneous (reproduction cost, communication costs/postage stamps/courier services/advertising expenses)

1,200,000.00 50,673.00 1,149,327.00

SUB-TOTAL- Other

Expenses

45,656,102.00 6,292,385.27 3,363,716.73

339,310,821.85 49,971,867.57

GRAND TOTAL 389,282,689.42 389,282,689.42

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Annex 1 Arrangements for Results Monitoring

Program Development Objective: to increase taxpayer compliance by increasing the efficiency and effectiveness of the BIR in the short-term, and prepare the BIR for a sustainable and long-term reform.

D=Dropped

C=Continue

N= New

R=Revised

Data Collection and Reporting

Intermediate Outcome Indicators Baseline

2005

Target

2012

Frequency of

Reporting

Data Collection

Group

Long-term reform preparation

• Increase in commonly-shared internal and external expectations of reform accomplishments.

• Percent of respondents who said that BIR services have met their expectations in the ease of conducting transactions

• Percent of respondents who said that BIR services have met their expectations in generating satisfying results

D N N

Results of survey to be conducted at the start of the loan. 79.5 percent* 85.2 percent*

80% of expectations are commonly-shared. 82 percent 87 percent

Annual Annual Annual

TRAG, PPS, LTS, OG TRAG, PPS TRAG, PPS

• Percent of BIR staff awareness of the projects involved in tax reform.

R 81 percent*

90 percent

Annual TRAG, PPS, HRDS, OG

Program Development Objective: to increase taxpayer compliance by increasing the efficiency and effectiveness of the BIR in the short-term, and prepare the BIR for a sustainable and long-term reform.

D=Dropped

C=Continue

N= New

R=Revised

Data Collection and Reporting

Intermediate Outcome Indicators Baseline

2005

Target

2012

Frequency of

Reporting

Data Collection

Group

Component A: Tax Compliance

• A unified/integrated and comprehensive registration system with complete and up-to-date taxpayer information.

• Registered taxpayers as a percentage of the labour force

• Percentage of filers over total registered taxpayers

C N R

Registration database for clean-up as of 2006: 385,000 Corporate and 6.3 million Individuals 44.4 percent* 35% for CIT* 29% for PIT*

A single database for all taxpayers. 47 percent 85% of taxpayers in database file returns the following year.

Annual Annual

ISG, Registration, Filing and Payment Task Force, OG ISG, Registration, National Statistics Office ISG, Registration

19

Program Development Objective: to increase taxpayer compliance by increasing the efficiency and effectiveness of the BIR in the short-term, and prepare the BIR for a sustainable and long-term reform.

D=Dropped

C=Continue

N= New

R=Revised

Data Collection and Reporting

following year.

• Increase in the number of stop filer cases arising from erroneous/invalid registration information eliminated from registration database.

• Increase in the number of new registered taxpayers 1

D C

Invalid stop filers identified from registration clean-up process. 1.3 million Over 2004-05.

80% of invalid stop filers arising from erroneous/invalid registration eliminated due to clean-up. Annual increase of at least 5% over the program duration.

Annual Annual

Operations Group/ Registration Filing and Payment Task Force, ISG Operations Group/ Registration Filing and Payment Task Force, ISG

Component B: Tax Enforcement and Control

• Increase in the number of accounts receivable (A/R) settled and improved settlements process.

• Amount of arrears collected in year n as % of potentially recoverable arrears in year n-12

C N

P4.5 billion from 2003 to August 2006.

10% annual reduction in outstanding accounts receivable.

Annual Annual

Collection Service, all Collection units Collection Service, all Collection units

Component C: Human Resource Development and

Management

• Increase in the use of performance management system (PMS) for office and staff appraisal and development.

C PMS developed and piloted in LTS and some offices.

Institutionalization of a PMS for all offices and individuals.

Quarterly HRDS, PPS, ISG

Component D: Management Tools, Change

Management, and

Project/Program Management

• Use of operational indicators in BIR quarterly reports and of agency-level KPIs in BIR annual report.

R

Limited use. Routine use by Management Committee.

Quarterly TRAG, MANCOM

1 The number of registered taxpayers increased by 1.3 million from 8.76 million at the end of CY2004 to 10.02 million by the end CY2005.

2 This is part of the new agency-level KPIs and BIR plans to produce the 2011 data by end-March 2012. Definition of “potentially recoverable arrears” is arrears of 3 years of maturity or less as defined in agency-level KPIs.

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*Indicates 2010 baseline data.

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