IMF keeps tabs on Philippines' BIR

By Rodney Jaleco, ABS-CBN North America News Bureau

Posted at Oct 14 2010 11:35 AM | Updated as of Oct 14 2010 09:14 PM

WASHINGTON D.C. - The United States has tapped the International Monetary Fund (IMF) to closely watch the progress of reforms in the Philippine Bureau of Internal Revenue (BIR).

The Millennium Challenge Corporation (MCC), which doles out development grants under the auspices of the US State Department and the IMF, recently signed a partnership agreement to provide capacity-building support for the reform and modernization of tax administration in the Philippines.

An MCC statement pointed out this was the first time such a partnership has been forged between the US government and IMF.

The MCC said $4.6 million from the $434 million compact grant for the Philippines will be used to pay for technical assistance from the IMF’s Fiscal Affairs Department.

While the bulk of the MCC compact agreement will go to poverty-alleviation, road-building and livelihood projects, more than $54 million was also earmarked to computerize and streamline the BIR’s operations that is designed to go after tax cheats and improve collections.

Under the agreement, the MCC will pay for a “resident advisor” to be posted with the BIR as well as a “significant number of short-term technical assistance missions by IMF experts."

The MCC said it expects the IMF will be able to send an assessment mission to Manila next month and deploy the “resident advisor” to the BIR before the end of the year.

The Philippine’s quest for an MCC Compact grant had been mired by repeated failure of the administration of former President Gloria Macapagal Arroyo to pass the agency’s “corruption test."

President Benigno Aquino III has made fighting graft and corruption one of the pillars of his administration, but there are still lingering doubts that he will be able to deliver on that promise.

The BIR had often been seen as one of the most graft-prone agencies in the Philippines. The World Bank, IMF and other international financial organizations have often cited the need for the government to plug loopholes in revenue collections so the Philippines can raise enough money to pay for expanding basic services and development.

The MCC said it expected to get the first IMF report on BIR reforms in early 2012.

The partnership agreement was signed by Murillo Portugal, IMF Deputy Managing Director, and Patrick Fine, MCC Vice President.

“The agreement will serve as a solid foundation for success in reforming the Philippines Bureau of Internal Revenue as was as a solid foundation for productive collaboration between the IMF and MCC,” Fine said.