Going Digital

Computerized tax collection boosts LGU incomes
BY CARMELA FONBUENA/Newsbreak

THERE MUST be something wrong when a province like Aklan, which draws thousands of tourists annually because of its world famous Boracay Island, is still highly dependent (90 percent of its total budget annually) on its Internal Revenue Allotment (IRA).
Gov. Carlito Marquez blames the economic mismatch to poor tax collection in the province. “We have an efficiency rate of less than 50 percent,” he says. The last time they updated the values of real properties in Aklan was 10 years ago, too. “There’s very low assessment of values.”
Prime properties on Boracay may have a market value higher than properties in Makati, but these are not reflected in the books of the province. “Once it’s being left to the discretion of personnel handling assessment, the values may not appear as you want them to appear, [resulting in poor collection].”
Realizing these problems, Marquez understands that computerization is the way to go. “If you remove the human-to-human contact, you will be more accurate in your assessments.” He studied the experiences of other local government units (LGUs) that computerized their tax collections and “I saw the jump in their collections,” he says. “We want to improve our collection, too.”
Poor tax collection is a common problem among LGUs nationwide. A recent study by the National Tax Research Center submitted to the Department of Finance shows that LGUs had an average tax collection efficiency rate of 58 percent from 1993 to 2004.

It means 42 centavos of every P1 due the LGUs in taxes were not collected. Total uncollected tax amounted to P59 billion for the entire period.
Based on the assessment of Manuel Tabunda, president and chief executive officer of Amellar Corporation, an IT service provider for LGUs, “Boracay Island alone should be able to subsidize the entire province.” Amellar was hired by the Capitol to computerize tax collection in the towns of New Washington, Kalibo, and Malay. The rest of the towns will follow.
“That’s true,” Marquez says about Tabunda’s assessment. “Tourism in Boracay is a multi-billion industry. It’s time that we take advantage of it.”

Aklan is borrowing P39 million from the Philippine National Bank for this purpose. Computerized tax collection is expected to take effect in January. There’s much to gain in computerizing tax collection schemes.

Established in 1994, Amellar has helped over 40 LGUs in this effort, all of them enjoying a dramatic increase in collections.

After two failed attempts in 1997 and 1999, Manila switched to computerized real property tax administration and business licensing in 2005. It resulted in up to 36 percent increase in collections, from P921.6 million in 2004 yo P1.25 billion in 2005.
One of the first things that an LGU can discover after going digital is its list of delinquent taxpayers. Before Amellar, Marikina City accounted for only P40 million in tax delinquencies.
After automation in 1999, the city discovered that it was actually losing P250 million to delinquent taxpayers. Tagaytay City also identified around P141 million collectibles from its delinquent taxpayers in 2001. “By identifying [your delinquent taxpayers], you can now focus your efforts on them and you will increase your efficiency rate,” Tabunda says.
After updating value assessments, an LGU will also come up with a higher taxable assessed value (TAV). Tagaytay discovered after automation that its TAV should be P11.4 billion and not P4 billion as recorded in 2000. Bataan had the same story. Automation increased TAV from P7.3 billion to P15.7 billion in 2002.
Going digital shortens transaction time and increases efficiency rate. “In some cases of manual tax collection, the cost of collecting taxes is higher than the actual collection. In this case, the LGUs suffer a loss,” Tabunda says. Automation reduces the amount of clerical work, leaving the LGU with less personnel to maintain.
Before the computerization, it took one to two hours for taxpayers in Caloocan and Urdaneta cities to pay their dues. Now, it only takes one to five minutes. “It’s the same case in other LGUs we computerized,” Tabunda says.
Automation may also inform an LGU of other details about its taxpayers so that they can work on unique styles to collect taxes efficiently. Upon learning that 79 percent of Tagaytay real property units are owned by non-residents, the city extended tax payments until Saturdays.

This gave non-resident taxpayers time to go to the city hall and pay their dues. Realizing that they are not voters in the city also made aggressive tax collection efforts politically safe.
Marquez expects the same income growth by the end of 2007. “Increase in revenues will mean we can provide better and more services to our constituents.”