BIR Annual Report 06

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					       The BIR’s Centennial Logo (torch) pictures the agency as a beacon of
light. Being at the heart of the country’s relentless pursuit to collect revenues,
the BIR is the medium that keeps the light of governance burning. The torch’s
shaft/handle bears the tricolors of the Philippine flag. The BIR’s seal being at
the bottom-center of the flame illustrates the important role it plays in keeping
the flame burning during the last 100 years and forward. The light that the
flame emits discloses the BIR’s theme.
       The Centennial Theme: “Buwis sandIgan ng Republika” was aptly coined
to accentuate the Bureau’s extreme importance for the government to continue
to exist and for the nation to continue to stand and grow. It fittingly expresses in
the national language the solid and unwavering support the BIR gives to the
government. It also lends credence to the BIR’s aspiration to continue to play
an indispensable role in nation-building even as it grows and continues to exist
alongside government and country.

(CY 2004 BIR Annual Report)

 I. Commissioner’s Message                     2

 II. 2004 Special Events                       4

III. BIR Collection Performance
     A. Overall Performance                    6
     B. Collection by Major Sources           10

IV. Major Accomplishments
     A. More Effective Taxpayer Compliance
        and Control Systems                   18
     B. Effective Detection and Elimination
        of Revenue Leakages                   31
     C. Intensified Enforcement               35
     D. BIR-Private Sector Good and
        Honest Governance Program             38
     E. Organizational Adjustments            42

V. Administrative Matters
     A. Personnel Complement                  45
     B. Cost of Operations                    46
     C. 2004 Revenue Regulations              47

VI. Tax Statistics                            49

VII. Directory of Officials                   60

BUREAU OF INTERNAL REVENUE                         1

    T    The Year 2004 was truly a year of great
    achievement, and great challenge, for the Bureau. It
    was the year when the revenue service marked its
    Centennial Anniversary, thus, celebrating not only the
    growth of the Bureau as one of the country’s most
    important institutions, but also the evolution of
    Philippine public finance.

         Yet 2004 was also a year of immense challenge.
    The Bureau registered a collection performance of
    P468.18 Billion, which marked an increase of P42.17 Billion – and a 9.90% growth
    rate – over revenues for the year 2003. This achievement meant that the Bureau was
    able to attain 98.29% of its 2004 revenue targets.

         Every year, changes in the country’s tax system, as well as developments in both
    the national and global economic scene, play a significant role in the fulfillment of
    the Bureau’s mandate. Amendments to the Value-Added Tax (VAT) and Documentary
    Stamp Tax (DST) systems, in particular, had a substantial impact on the Bureau’s
    collection efforts. Republic Act No. 9238, which provided for the return of banks
    and non-bank financial intermediaries – all previously subject to VAT – to the gross
    receipts tax, set back VAT collection by at least 14%. The implementation of Republic
    Act No. 9243, which lowered DST rates and extended exemptions to twelve (12)
    additional transactions – including all transactions of the Bangko Sentral ng Pilipinas
    – also resulted in a slowdown in DST collections.

         These considerations notwithstanding, remarkable achievements were made in
    the Bureau’s continuing efforts to improve the quality of taxpayer services, and the
    efficiency of the country’s collection system. Several breakthroughs in the Bureau’s
    IT endeavor are particularly noteworthy. The ground-breaking Electronic Filing and
    Payment System (eFPS) showed a 634% increase in enrollees, which reached 11,537
    taxpayers by the end of 2004. More importantly, collection from the eFPS increased
    by 49%, indicating a growing trend among taxpayers to utilize this vital e-Service of
    the Bureau.

        By far the most notable accomplishment of the Bureau as regards to its joint IT
    and operations efforts in the field of audit is the implementation and expansion of the
    revolutionary Reconciliation of Listings for Enforcement (RELIEF) System. The RELIEF

2                                        2004 ANNUAL REPORT
System, which is now fulfilling its immense potential as one of the Bureau’s most
important audit and investigation projects, resulted in the filing of criminal charges
against numerous taxpayers found to be employing tax evasion practices. Indeed, the
Bureau’s enforcement activities in 2004 generated at least P1.116 Billion in revenues.
This development sends a strong message that the Bureau is determined to bring all
those who would violate the country’s tax laws to the bar of justice, there to be held
accountable to the fullest extent of the law.

     Each year brings with it the dual opportunity to learn, and achieve - and indeed,
the Bureau has done both with admirable commitment to its mission as the country’s
premier tax administration agency. The lessons given by both the changing economic
landscape and evolving taxpayers’ needs provide the Bureau with its most important -
and most enduring source of insights on how to continually enhance the quality of tax
administration. While 2004 may not have been as successful as the Bureau had hoped
it would be, it is a year in which the revenue service truly marked its coming-of-age as
one of the country’s foremost public service institutions, and as one of the primary
agents for change in Philippine finance. It is also a year that has, more than anything
else, stood as witness to the Bureau’s capacity to weather even the most pressing
challenges that may be posed by our ever-changing economic, political and social
landscape. Through times of war and peace, prosperity and adversity, the Bureau has
not merely survived – it has grown, matured, evolved.

     It is in this light that I am confident that the men and women of the revenue service
will continue to bear the torch of professionalism and public service not only into a
new century in the Bureau’s existence, but also into a new epoch in the history of
Philippine governance. Heirs to a long legacy of excellence and commitment to public
service, they are the hope and future of the tax administration system, and the heralds
of a new dawn in Philippine finance. I trust that in the years ahead, they shall continue
to serve the Bureau and Filipino people with the same commitment and competence
that are the foundations of true public service, and thereby bear witness to the enduring
role of taxation in the future of our beloved country.

                                           GUILLERMO L. PARAYNO, JR.
                                           Commissioner of Internal Revenue

BUREAU OF INTERNAL REVENUE                                                                   3
                                                                                                                               January 31
30 Selection logo / theme with
               of the BIR
                                         31    Tax Campaign Kick Off of RR
                                               7-Quezon City at SM North
     the members of the Board of               Edsa with its theme “Magkaisa
     Judges headed by ACIR                     sa Kaunlaran, Tamang Buwis
     Lucita G. Rodriguez of the                Ating Bayaran,” with Mayor
     Taxpayers      Assistance                 Feliciano “Sonny” Belmonte Jr.
     Service.                                  as guest of honor.

                                                   16        Tax Campaign Kick Off of
                                                             RR      8-Makati      in        9 Tax 6-Manila at KickManila
                                                                                                                    Off of
                                                                                                                                 21 Off Campaign Kick
                                                                                                                                         of RR 5-
                                                             cooperation of the Makati            with its theme “Buwis na             Valenzuela at SM
                                                             Business Club and other              Babayaran, Bayan ang                 Marilao.
                                                             Business             and             Makikinabang.”
                                                             P r o f e s s i o n a l
                                                             Organizations, with its
                         February 16                         theme “Sa Sandaang
                                                             Taong Singkad, Buwis
                                                             Kaagapay sa Pag-unlad.”

                                                        2      Launching of the Centennial
                                                               Taxpayers         Recognition
                                                               Program (CTRP) through the                                              March 2
                               3 Tax Campaign Kickthe
                                 and Briefing of
                                                   off         signing of Agreement of
                                                               Cooperation and Endorsement
                                   BIR Centennnial             between           the       BIR
                                   T a x p a y e r s           (Commissioner Guillermo L.
                                   Recognition Program         Parayno, Jr.) and the Philippine
                                   (CTRP) of RR 9-San          Chamber of Commerce and            April                      May
                                   Pablo City.                 Industry (President Sergio
                                                               Ortiz-Luis, Jr.).
                                                                                                  Filing of Income Tax
                                                                                                  Returns (ITRs).        4 Opening ofatthe BIR Centennial
                                                                                                                           Sportsfest the National Office
                              5 and Campaign kick off
                                    CTRP launching                                                                           grounds participated in by
                                   of RR 10- Legazpi City                                                                    around 200 athletes from the
                                                                      May 4
                                   at the Pacific Mall.                                                                      seven (7) groups in the
                                   Commissioner                                                                              National Office namely: CIR’s
                                   Guillermo L. Parayno,                                                                     group, Legal and Inspection
                                   Jr. recognized the 23                                                                     Group, Operations Group,
                                   outstanding taxpayers                                                                     Information Systems Group,
                                   of Bicol Region.                                                                          Resource Management Group,
                                                                                                                             Large Taxpayer Service and
                                                                                                                             combined group of BIRSALA,
                                                                                                                             BIREA and BIR Cooperative.

                                             25 Conductof RR 8-Mappingusing Blackberry
                                                         of Tax
                                                                       by the Revenue


                                             29 National Search for the Centennial BIR Girl
                                                at Teatro Aguinaldo in Quezon City. Ms.
                                                   Hannah Leah M. Tulio of RR 18- Cotabato
                                                                                                        July 29
                                                   City was crowned as the BIR Centennial Girl.
                               YEARS               The panel of judges were composed of
                                                   Secretary Mike Defensor, Ms. Lea Salonga, and
                                                   Vicky Belo.
                                                          30 Conduct of the Search forCeldran acted as the quiz master.the National
                                                             Office wherein Mr. David
                                                                                      the Centennial BIR Tax Wizard at
                                                                                                                         Mr. Rufino
                                                                C. Cantaros, Jr. of RR 15 - Cagayan de Oro City emerged as the
                                                                brightest revenuer from among the 25 contestants.

                    July 30
                                                         31     BIR Family Day held at the National Office grounds. Live airing of Eat
                                                                Bulaga’s Laban o Bawi which was participated by selected BIR

  ` August
  2 Recognition of the BIR 2-13
    Model employees wherein
                                        Two-week exhibit, dubbed as “E-volution of Tax Systems”
                                        held at the BIR National Office featuring the
     Ms. Juliana U. Lasquero of         Organizational Transformation of the BIR, the different
     Revenue Region No. 3 -
                                                                                                                                August 2-13
                                        tax reforms implemented over the years, and the BIR’s
     Tuguegarao, Cagayan was            electronic services and web-based applications: e-TIN,
     proclaimed the over-all            e-FPS, eAlphalist, ePayee, e-RELIEF, eBroadcast,
     winner.                            eReportcard, and BIR Contact Center.

                                                                                        8 Launching of promo through theI-txt ang
                                                                                          Resibo” raffle
                                                                                                         the 2004 “Bayan
                                                                                            of the Memorandum of Agreement between
                                                                                            the Bureau and RPN9.

       August 2
                                                         September 8
                                                                                        5 Conduct of the Tax Symposium for Medical Practitioners
                                                                                            which discussed the medical profession’s tax compliance
     October                                                                                profile based on a sample of data gathered by the Bureau.
22 Signing of Memorandum of
     Agreement with the UP
     College of Law Dean Raul                                                         19     Signing of the Memorandum of Understanding between
                                                                                             the BIR and Securities Exchange Commission to
     C. Pangalangan, as part of                                                              promote the electronic exchange of information between
     the BIR - Academe Legal                                                                 the two agencies.
                                                              October 22
     Assistance       (BALA)

                                                                                      22 Started theasawarding ofMonday flag-raising ceremony
     Program.                                                                                                     the Top Centennial Taxpayer
                                                                                         Awardees part of the
                                                                                            at the BIR National Office. At year end, five (5) taxpayers
                                                                                            have been commended: SM Prime Holdings, Inc., GMA
                                                                                            Network, Inc., Bauang Private Power Corporation, CE
                       December                                                             Cebu Geothermal Power Company and United
                                                                                            Laboratories, Inc.
                 17 Grand Christmas
                    Conduct of the

                      Draw of the BIR
                      eRaffle Promo
                      held at SM City
                      North Edsa.
                                                     December 17
    O   Overall Performance

        In CY 2004, the BIR generated a total collection of P468.18 Billion. It surpassed its
    CY 2003 collection by P42.17 Billion or 9.90%, despite uncertainties in the economic
    and political environment (such as the May election), typhoons that hit the country
    during the fourth quarter, the recurring peace and order problems and the Iraq War.
    Said collection represents 98.29% attainment of the P476.31 Billion goal.









                               GOAL 2004          COLLECTIONS 2004      COLLECTIONS 2003
            In Billion Pesos     476.31                468.18                426.01

6                                          2004 ANNUAL REPORT
                                                             The National Statistical Coordination Board
                                                         (NSCB) reported that nominal Gross Domestic
                                                         Product (GDP) grew by 12.6% in CY 2004, from
                                                         the 8.4% growth last year. GDP growth was fueled
                                                         by strong performances of all three major sectors:
                                                         Agriculture, Industry and Services accelerated by
                                                         17.9%, 12.0% and 11.6%, respectively. Tax effort
                                                         is 9.88% of nominal GDP. However, excluding
                                                         the Agriculture Sector from the total GDP, tax effort
                                                         is 11.44%.

                 14                      13.00
                                 12.01           12.65

                        11.09                               11.47
                 12                                                 10.76   10.70   10.16   10.12   9.88






                      1995      1996     1997    1998      1999   2000      2001    2002    2003    2004

    The Bureau’s various administrative measures, such as the Tax Compliance
Verification Drive (TCVD), Business Intelligence Task Force (BITF), Centennial
Taxpayers Recognition Program (CTRP), and Third Party Information (TPI) Program
along with intensified enforcement through Special Operations on Selected Sectors/
Industries, enhanced the BIR’s collection performance.

   Various non-revenue generating programs likewise served to refine the Bureau’s
operations. For a more effective taxpayer compliance and control system, the following

  BUREAU OF INTERNAL REVENUE                                                                                     7
    e-systems were enhanced and/or implemented:
    Expansion of Electronic Filing and Payment System
    (EFPS), e-broadcasting, e-submission, e-TIN, e-
    Portal Project, e-New Government Accounting
    System (NGAS), BIR e-raffle, and the Automated
    Excise Data Management System(AEDMS).
    External linkages with Government Agencies and
    Electronic Data Matching of One-Time
    Transactions (eDMO) projects were carried out
    to effectively detect and eliminate revenue
    leakages. There were also improvements in the
    internal organization through strengthening of
    investigation and prosecution of erring personnel
    and outsourcing of certain IT operations.

       Voluntary Payments and Delinquent Accounts
    showed increases of 10.30% and 3.99%, respectively, against previous year’s collection.
    However, Preliminary/Final Assessments registered a 43.71% decrease in collection.
    Voluntary Payments consist of collections from self-assessment, tax deposit/advance
    payment, income tax second installment, penalties and others, including payments
    made prior to issuance of preliminary/final assessments and special/one-time revenue
    enhancement programs [e.g. Centennial Taxpayer Recognition Program (CTRP)].

        Voluntary Payments comprised 99.77% of the total BIR collections while
    Preliminary/Final Assessments and Delinquent Accounts shared 0.17% and 0.06%,

                       Percent Distribution of COLLECTIONS
                            By MANNER OF PAYMENT
                                      CY 2004

                                          Voluntary Payments

                                                           Preliminary / Final
                        Delinquent Accounts                  Assessments
                              0.06%                              0.17%

8                                             2004 ANNUAL REPORT
    The Large Taxpayers Service collected a total of P258.01 Billion, which represented
54.94% of total collections while revenue regions accounted for P211.58 billion or
    Revenue Region No. 6 (Manila) shared P51.37 Billion (10.94%) of the total
collections followed by RR 8 (Makati) and RR 7 (Quezon City) with P47.51 Billion
(10.12%) and P42.84 Billion (9.12%), respectively. Other major contributors were:
                                           RR 9 (San Pablo City), P20.67 Billion
                                           (4.40%); RR 5 (Valenzuela), P6.78 Billion
                                           (1.44%); RR 4 (San Fernando, Pampanga),
                                           P6.48 Billion (1.38%); and RR 13 (Cebu
                                           City) P5.89 Billion (1.26%).
                                               Ten out of twenty Implementing Offices
                                           exceeded their collection targets for CY 2004
                                           with RR 14 (Tacloban City) posting the most
                                           notable performance, exceeding its assigned
                                           collection goal by 30.22%. RR 11 (lloilo
                                           City) is second highest, with 4.97% excess
                                           over goal, followed by RR 1 (Calasiao,
                                           Pangasinan), with 3.26% excess over goal.

                    Percent Distribution of Total BIR Collections
                       By IMPLEMENTING OFFICE, CY 2004

                                              RR 4 - San Fernando,   RR 5 -
                                              Pampanga               Valenzuela. MM
                                              1.38%                  1.44%
Large Taxpayers Service                                                                    RR 6-Manila
54.94%                                                                                     10.94%

                                                                                                 RR 7-
                                                                                                 Quezon City

                                                                                       RR 8- Makati
                                                                     RR 9-San Pablo City
                              Other regions                          4.40%
                                                 RR 13-Cebu City
                              6.38 %

BUREAU OF INTERNAL REVENUE                                                                                     9
      C   Collection by Major Sources

         Based on share to total revenues, Taxes on Net Income and Profit accounted for
     59.42% followed by Value Added Taxes and Excise Taxes at 17.13% and 12.72%,

                      Percent Distribution of BIR Collections
                        By MAJOR TYPE OF TAX, CY 2004

                                       Other Taxes                 Taxes on Net
                   Percentage Taxes    4.76%                       Income & Profit
                   5.97%                                           59.42%

     Value Added

                              Excise Taxes

10                                             2004 ANNUAL REPORT
   Collection from Excise Taxes and Other Percentage Taxes exceeded targets while
Taxes on Net Income and Profit, Value Added Taxes and Other Taxes incurred deficits.

           Comparative Collection and Goal by TYPE OF TAX
                  CY 2004-2003, (In Billion Pesos)

           300.00                                                                    Goal 2004

                                                                                     Collections 2004
                                                                                     Collections 2003











                     Income Taxes       Excise            Value Added   Percentage   Other Taxes
                                        Taxes               Taxes         Taxes

   More than half or 54.94% of the total collection was collected by the Large
Taxpayers Service (LTS) while the rest of 45.06% was collected by the Revenue Regions
         Percent Share of Collection by IMPLEMENTING OFFICE
                     by Major Type of Tax, CY 2004

                        55.33%                   45.47%      34.92%     48.14%
                                                                                       Regional Offices
               50%                  100%
               40%                                                                     Large Taxpayers
               30%                                54.53%       65.08%
                        44.67%                                           51.86%
                       Income       Excise Value-Added Percentage Other
                        Taxes       Taxes     Taxes      Taxes    Taxes

BUREAU OF INTERNAL REVENUE                                                                                11
Income Taxes

   Income Tax collection posted an increase of P34.08 Billion or 13.96% over last
year’s collection and a shortfall in goal by P0.63 Billion or 0.23%. The collection of
P278.21 Billion is 59.42% of the total internal revenue collection for the year.

    Revenues from Corporate Taxes were
higher by 9.17% compared to 2003
collection. However, it was 4.45% below
the collection target. The rise in collection
came mainly from increased tax payments
from industry sectors of electricity and gas,
communication, beverage, and non-metallic
mineral products, among others, due to:

•   Increase in electricity generation and sales
    to major customers
•   Positive performance of the wholesale
    and retail trade due to price increase and
    strong consumer demand
•   Continuous rise in mobile phone
    subscribers in 2004, due to strong
    demand in the provinces where
    telephone penetration is still low, the
    introduction of micro loads, low handset
    prices, money transfer through cell
    phone, and to the success in the
    marketing of camera phones
•   Escalation of the gross value-added
    growth rates in certain industries, such
    as electricity and gas, trade, transport and storage

    Total Individual Income Taxes exceeded the target revenue by 2.03% and
surpassed last year’s collection by 10.46%. The bulk of collection came from
Withholding Tax on Wages. It registered the biggest share with 83.52% while Capital
Gains Tax registered the least with 4.18% contribution.

   Collections from Capital Gains Tax on Sale of Real Properties went up by 2.87%
compared to 2003 collection but was lower than target by 11.65%. The escalation of
collection is supported by the 22.6% increase in Gross Value Added (at current prices)
for Real Estate. Based on the National Accounts of the Philippines, affordable residential
projects and the added flexibility in financing attracted more buyers to invest in real

     Final withholding tax on Bank Deposits surpassed last year’s collection by P1.49
Billion or 11.98% but was deficient of its target by P4.26 Billion or 23.44%. Said
deficiency arose due to the non-attainment of the programmed Weighted Average
Interest Rate of 6% for the year, the actual average interest rate for savings deposit
being lower at 4.26%.

    Treasury Bills exceeded the 2003 collection by P4.23 Billion or 15.10% but fell
short of the target revenue by P1.31 Billion or 3.92%. The growth in Treasury Bill
rates from 6.03% in CY 2003 to 7.34% in CY 2004 and the increase in the volume of
outstanding national government securities by 165.03% resulted to the improved
collection from this type of tax. However, the deficit in collection compared to its goal
is due to the non-attainment of the projected interest rate of 8.6%, the actual rate
                                         attained being 7.34%.

                                              More than half of the total Income taxes,
                                          or 53.33%, were collected by Revenue
                                          Regions, while the remaining share of 44.67%
                                          was collected by the Large Taxpayers Service

                                          Excise Taxes
                                               Excise tax collection of P59.53 Billion
                                          accounts for 12.72% of total revenue
                                          collections. There was an increase of P2.49
                                          Billion or 4.36% over collections last year
                                          (P57.04 Billion) and excess over goal (P51.62
                                          Billion) by P7.91 Billion or 15.31%. The
                                          positive performance could be attributed to
                                          the following:

                                          • Volume of removals of distilled spirits and
                                            fermented liquors rose by 42.07 Million
                                            proof liters or 16.58% and 224.18 Million
                                            gauge liters or 16.81%, respectively.
•   Increased prices of all beer products, in the local and international markets, effective
    March 2004.
•   Volume of removals for cigarettes and cigars rose by 434.72 Million packs or
    9.89% and 0.132 Million pieces or 6.21% respectively.
•   Personal consumption expenditure on tobacco products for the year increased by
    P2,189 Million or 3.9% (National Accounts of the Philippines, CY 2002 - 2004)
•   Volume of removals for automobiles increased significantly by 26,716 units from
    18,304 units last year to 45,020 units this year or 145.96% increase.
•   Volume of removals for non-essential products also rose by 734,820 units from
    13,401,451 units last year to 14,136,271 units this year or 5.48% increase.
•   Implementation of RR No. 25-2003 where previously tax-exempt units such as
    Asian Utility Vehicles (AUVs) and Sport Utility Vehicles (SUVs) are now subject
    to excise tax.
•   Gross Value Added (GVA) for mining and quarrying for the period increased from
    P43,566 Million to P52,887 Million or 21.4%.

Value Added Taxes

    Collections from Value Added Taxes (VAT) amounting to P80.22 Billion comprised
17.13% of total tax collections. It was short of the target by P13.51 Billion or 14.42%
and lower than the previous year’s collection by P2.42 Billion or 2.93%. Deficiency
from goal was mainly due to reversion of Banks from VAT to percentage taxes (GRT).
LTS collected 54.53% of total VAT while the Revenue Regions collected 45.47%.

    Only a few sectors increased their tax payments this year. These sectors included
manufacturing, storage and warehousing, sale/lease of intangible property and selected
sectors under business services. On the other hand, the sectors/transactions with
significant VAT losses were the following:

•   Community, Personal and Household Services which was affected by the
    implementation of Republic Act (RA) No. 9238, exempting from VAT the sales
    of electric cooperatives on the generation and distribution of electricity and
    importation of machineries.
•   VAT Withholding on government purchases of goods, services and on government
    public works contracts due to the austerity measures adopted by the Government.
    As reported in the National Accounts of the Philippines, the Government sustained
    its vigilance to contain its fiscal deficit and kept the growth of Government Services
    restrained at 1.6% from 2.9% in the previous year.

Percentage Taxes
   The total taxes collected from Percentage Taxes (PT) reached P27.95 Billion,
which represents 5.97% of the overall BIR collection. It escalated by P9.06 Billion or
47.94% and exceeded its goal by P6.93 Billion or 32.94%.

    The positive performance of percentage tax collection was caused mainly by the
increase in remittances from banks/ financial institutions. This is directly related to the
implementation of the reversion from VAT to gross receipts tax for banks/financial
institutions. Based on the National Accounts, Gross Value-Added growth (at current
prices) of banks and of non-banks sectors increased by 14.3 and 15.8 percentage points,
respectively, due to the continued upsurge in loan availment, trading gains from
investments in government securities and higher income from fee-based transactions.
Based on other reports, the non-performing assets of banks slightly improved during
the year.

    Collections from Large Taxpayers Service reached P18.23 Billion or 65.08% of the
total percentage taxes while the Revenue Regions shared 34.92%.

Other Taxes
    Collections from Other Taxes amounting to P22.26 Billion comprised 4.76% of
total tax collections. This year’s collection is off-target by P8.82 Billion or 28.36% and is
P1.05 Billion or 4.49% short of last year’s performance. Documentary Stamp taxes was
the biggest source of collection with 81.60% share followed by Miscellaneous Taxes
with 13.94%. Most decreases were evident in these two types of taxes. Documentary
Stamp Taxes registered the biggest deficiency of P7.22 Billion or 28.44% below the
goal, followed by miscellaneous taxes with P1.34 Billion or 30.23% deficit. The
following contributed to the deficit:

•   The 2003 collection for this tax type included a windfall/significant deficiency tax
    payment of P4 Billion for RR 6 - Manila which no longer occurred in 2004.
     •   The implementation of RA No. 9243 provided for DST rates which is 50% to 66%
         lower than the previous rates and also prescribed DST exemptions for twelve (12)
         additional transactions including all transactions of the Bangko Sentral ng Pilipinas.
         Likewise, DST tax base on life insurance policies changed from total sum assured
         to amount of premium collected.

        The completion of the Voluntary Assessment and Abatement Program (VAAP) last
     year resulted to a decrease of P1.59 Billion in Miscellaneous Taxes.

         This year’s collection from Large
     Taxpayers Service (LTS) amounting to
     P11.60 Billion was 51.86% of the total
     collections from other taxes while
     Revenue Regions’ total collections of
     P10.77 Billion represented 48.14%.

         Tax Returns Filed

     For 2004, the total number of tax returns
     filed was recorded at 11,242,638
     registering an increase of 410,896 or
     3.79% from last year’s 10,831,742
     returns. The number increased in all
     major types of taxes except income tax where it went down by 115,262 or 7.07%. BIR
     Form No. 1700 continued to decrease due to substituted filing of returns for pure
     compensation earners prescribed by RR No. 3-2002. Despite this scheme, collection
     from withholding on wages increased by P7.62 Billion or 9.94%.

16                                           2004 ANNUAL REPORT
                             Distribution of Tax Returns Filed
                                     By TYPE OF TAX
                                         CY 2004

                                 Capital Gains Tax                      Withholding Taxes
                                 1.51%                                  38.30%
     Income Taxes

                                                                                            Value Added

 Miscellaneous Taxes
 12.63%                                                                     Excise Taxes
                       Transfer Taxes                Percentage Taxes       0.18%
                       0.45%                         20.18%

BUREAU OF INTERNAL REVENUE                                                                                17
More Effective Taxpayer Compliance
and Control Systems

    The Bureau of Internal Revenue continuously encourages the taxpaying public to
make a self assessment and voluntary compliance on their tax obligations. This is
attained mainly through implementation of operational systems that are taxpayer
friendly and promote optimum voluntary compliance.

Accelerated the Rollout of e-Systems

    In order to provide outstanding service to the taxpaying public and utilize the
viability of modern technology in support to the collection efforts and implementation
of programs, the following e-systems were developed and enhanced:

Electronic Filing and Payment System (eFPS)

   Revenue Regulations (RR) No. 5-2004 was issued this
year, expanding the coverage of eFPS to include the Top
10,000 Private Corporations duly identified under RR No.
17-2003. Revenue Memorandum Circular (RMC) No. 71-
2004, which mandates Insurance Companies and Stock
Brokers to avail of eFPS was also issued.

     This year, the number of enrollees reached 11,537.
This represents a 634% increase over previous year’s
1,571 enrollees. On the other hand, the number of returns
transaction via eFPS had totaled to 212,006, which represents 269% increase over
previous year’s 57,416 transactions. These transactions resulted to P233.36 Billion
collection representing a 49% increase over previous year’s collection of P156.79
     Currently, the number of eFPS Authorized Agent Banks increased from eleven (11)
to thirteen (13) namely: Banco de Oro, Bank of the Philippine Islands, China Banking
Corporation, Citibank N.A., Development Bank of the Philippines, Equitable PCI Bank,
Land Bank of the Philippines, Metrobank, Philippine National Bank, RCBC, Security
Bank, Union Bank and Standard Chartered Bank.

                                        CY 2003                                 CY 2004

1. Number of Forms                     27            (80% increase)        27

2. Number of Enrollees              1,571            (27% increase)    11,537         (634% increase)

3. Number of Transactions          57,416           (126% increase)   212,006         (269% increase)
4. Amount of Transactions         P156.79 Billion (152% increase)     P233.36 Billion (49% increase)
5. Average Payment                          P 2.73 Million                      P 1.10 Million
  per Transaction

Electronic Broadcasting (eBroad)

    The eBroadcasting System provides for a multi-channel tax payment confirmation
facility of taxpayers through the different eBroadcasting services such as: Short
                        Messaging Services (SMS), BIR Web, and e-mail. Tax payments
                        made by taxpayers to the BIR through Authorized Agent Banks
                        (AABs) can be confirmed within 48 hours from transaction date
                        via these services.

                                The System was piloted to taxpayers under the jurisdiction
                            of the Large Taxpayers Service, including Large Taxpayers
                            Assistance Division [LTAID] I and II and Large Taxpayers
                            District Offices [LTDOs] (Makati and Cebu), and Revenue
                            District Offices (RDOs) under Revenue Region (RR) No. 7 –
                            Quezon City.

                                Subsequent rollouts were implemented on the remaining
                            forty (40) computerized RDOs under Makati (RR No. 8), Manila
                            (RR No. 6), Valenzuela (RR No. 5), San Fernando, Pampanga
                            (RR No. 4), and San Pablo City (RR No. 9).
Electronic Correspondence (eCorrespondence)

    The e-Correspondence project aims to provide the BIR a facility for centralized
correspondence system covering the expansion of the Letter Notice (LN) Monitoring
System from the Reconciliation of Listings for Enforcement (RELIEF) Program, Tax
Reconciliation System [TRS], Third Party Information-Bureau of Customs [TPI-BOC]
and Stop Filer System, integration of eReport Card and other Integrated Tax System
(ITS)-TPI discrepancy reporting systems. The project also provides the Bureau a facility
to effectively monitor, control and update the status on issuance of correspondences
and the automatic generation of correspondences and management reports.

“Bayan i-Text ang Resibo 2004” (eRaffle Project)

     With the overwhelming and successful results of the conduct of the CY 2003
e-Raffle, “Bayan I-text ang Resibo 2004” was launched through a Memorandum of
Agreement (MOA) entered into by the BIR and RPN 9 Station on September 8. RPN 9
pledged its support by providing airtime for the e-Raffle draws (weekly, monthly, and
grand draws). Revenue Memorandum Order (RMO) No. 41-2004 was issued to provide
for the objectives, policies, mechanics, draw dates and prizes of the raffle promo.

                                    CY 2003                CY 2004               TOTAL
                                 (June - December)   (September - December)

        Number of Registrants         219,974                92,637               312,611

        Number of Entries           3,811,962            1,926,853              5,738,815

        Amount of Entries        P 21.64 Billion         P 8.84 Billion       P 30.48 Billion

        No “OR” Reports                 22,555                7,590                30,145
                                      This project was conducted from September 8,
                                  2004 until December 15, 2004 with four hundred forty
                                 (440) winners: i) five (5) monthly and one (1) grand
                                draw winners of P1,000,000 each; ii) seven (7) bonanza
                                draw winners (texters) of P30,000 each;
                               iii) seven (7) bonanza draw winners (issuers) of P20,000
                               each; iv) three (3) grand draw winners (issuers) of P50,000
                              each; and v) four hundred eighteen (418) weekly winners
                              of P 25,000 each.

                                   With this eRaffle project, the BIR has gained
                              international recognition after it was given a nomination
                             in the prestigious 2004 Management Information System
                            (MIS) Innovation Awards in Singapore held last September
                            22, 2004. The BIR landed no. 62 among information
                           technology users in Asia and no. 3 among the Philippine
                           entries. On the local front, the project was given the Grand
                          Gawad Oscar M. Florendo (GOF) Award as outstanding
                          public information program which encourages consumers
                         to habitually ask for official receipts on purchases being made.

                               As an offshoot of this project, electronic data gathered
                          from the e-Raffle forms part of the BIR data warehouse wherein
                         information on business entities and/or professionals who are
not issuing official receipts/invoices can be obtained and utilized as TPI database for
benchmarking and data mining purposes.

Electronic Registration (eRegistration)

    The eRegistration system aims to provide online registration of taxpayers via the
internet. This has four (4) phases of implementation, namely:

    • Phase I - TIN issuance of new taxpayers classified as professionals and TIN
      inquiry of individual taxpayers. As of December 2004, forty thousand nine
      hundred fifty-nine (40,959) taxpayers registered using electronic Taxpayer
      Identification Number (eTIN). The eTIN System enables the taxpayers to inquire
      their TIN through the BIR web. It also provides on-line registration to professionals
      via the internet.
    • Phase II – Programming and Design of eRegistration. This Phase, which was
       completed this year provides on-line payment of registration fee for single
       proprietorship/individuals, printing of Certificate of Registration (COR), and
       application for Authority to Print (ATP).

    • Phase III - Registration Update of Taxpayers. This Phase was included in the
       outsourcing initiative of the Bureau under the Application Development and
       Maintenance project.

    • Phase IV - Registration of other taxpayers such as corporations and partnerships,
       and establishment of linkages with other government agencies. This Phase is
       still presently undergoing testing of functionality in terms of the issuance of
       registration for corporations and partnerships.

Electronic Submission (eSubmission)

    This is a continuing program of the BIR which involves the electronic submission
of BIR Form Nos. 1604CF and E (Annual Information Returns on Income Taxes Withheld
on Compensation/Final Withholding Taxes and Creditable Income Taxes Withheld
[Expanded] / Income Payment Exempt from Withholding Tax, respectively) that uses
BIR- supplied encoding and validation modules to efficiently check for completeness
and correctness of taxpayer’s input. Continuing encoding and validation of said annual
information returns submitted electronically, through internet facility, by eight (8) pilot
PEZA taxpayers, namely: APC, IMI, Intel Philippines Manufacturing, Intel Technology
Philippines, P. IMES, Philips Semiconductors, Toshiba Information Equipment and Zilog,
are being done.

    Subsequently, Revenue Memorandum Circular
(RMC) No. 71-2004 mandated the use of
eSubmission for BIR Form Nos. 1604CF and E and
Summary Lists of Sales and Purchases (SLSP) for
eFPS taxpayers. Thus, handholding and various
briefings and online support to external and internal
stakeholders were conducted as well as a series
of hands-on training on the eSubmission of
Summary Lists of Sales and Purchases and the
Alpha Lists of Employees and Payees. The hands-
on training was participated by eight hundred
twenty-two (822) large excise taxpayers.
Electronic Data Matching of One-Time Transaction (eDMO) Project

    The Bureau developed the eDMO system in order to uncover unpaid taxes regarding
the transfer of real property.

    eDMO was piloted at selected RDOs in RR No. 7- Quezon City with the creation
of an eDMO Task Force which shall gather information from the notarized transfer
documents available in Regional Trial Courts (RTCs). The information gathered shall
then be encoded, through the use of an excel format, and are uploaded and matched
with data available in the BIR’s Integrated Tax System (ITS) for generation of discrepancy
reports that will serve as basis for the issuance of an eDMO notice sent to identified

     The matching conducted at the District level resulted to the gathering of four hundred
thirty (430) transactions, of which, eighty-seven (87) transactions had no payment and
four (4) transactions had payment discrepancies. Requests for certified true copies
were then made to the respective RTCs and Assessor’s Offices on the notarized
instruments, tax declarations and Transfer Certificate Title. A total of five hundred
forty-five (545) notarized transfer documents were encoded during the pilot
implementation in Revenue Region No. 7-Quezon City. Of this, four hundred thirty
(430) were manually matched against ITS data.

    In December 2004, the enhanced eDMO was implemented in RDO No. 57- San
Pedro, Laguna. This provided for a fox-pro-based eDMO Data Entry Program that
replaced the then excel format and made available the automated matching program
that will validate the data obtained from RTCs against ITS data.

Electronic New Government Accounting System (eNGAS)

   The electronic New Government Accounting System was introduced by the
Commission on Audit (COA) to improve the reporting and monitoring of disbursements
made by government agencies.

    Phase I of eNGAS comprises the Accounting and Budget Modules. The Accounting
Module covers various accounting processes such as recording, classifying,
summarizing and communicating financial transactions. This was rolled-out to the
Accounting Division and Revenue Accounting Division in the BIR National Office in
January 2004. On the other hand, the Budget Module covers application for use in
recording and tracking of budget-related transactions, such as allotments and obligations
which will be subsequently rolled-out to the Budget Division in February 2005. By
April 2005, both the Accounting and Budget Modules shall have been rolled-out to the
Finance Divisions of Revenue Region (RR) Nos. 4, 5, 6, 7, 8, and 9.

     Phase IIA of eNGAS comprises the submission of Annual Information Return (AIR)
using the eFPS. This covers six (6) tax returns, namely: Income Taxes Withheld on
Compensation and Final Withholding (1604CF); Income Payments Exempt from
Withholding Tax (1604E); Monthly Remittance Return of Value-Added Tax and Other
Percentage Taxes Withheld (1600); Monthly Remittance Return of Income Taxes
Withheld on Compensation (1601C); Monthly Remittance Return of Final Income Taxes
Withheld (1601F) and Monthly Remittance Return of Creditable Income Taxes Withheld
(1601E). This was rolled-out to Finance Divisions of RR Nos. 5, 6, 7 and 8 as well as
to the Accounting Division at the National Office on May 3, 2004 and Finance Divisions
of RR Nos. 4, 9 and 13 on October 15, 2004.

    Phase IIB expands the submission using eFPS of BIR requirements on withholding
tax remittances and its attachments. Target implementation date is June 2005.

Portal Technology

    BIR Portal is a single point of access (BIR web facility) to a set
of resources that an enterprise wants to make available to the
internet users. This technology transformed the website of the
BIR into communities making its content customizable and
accessible to its identified users: taxpayers, government agencies,
banks, contractors, employees, and the general public. This set
of resources includes: Legacy Application – Integrated Tax
System application, eServices Applications, Knowledge Base,
Third Party Information from government agencies and other
resources that are specific to the relationship between the user
and the Bureau.

   The BIR portal was launched and made available to the
public on December 17, 2004 via the internet thru https://
Letter Notice (LN) Monitoring System

    The LN Monitoring System, under the eCorrespondence, aims to automate the
generation and deployment of LNs via the BIR Information Delivery Portal. This system
enables the Revenue Regions (RRs) and Revenue District Offices (RDOs) to provide
online updates on LN status and collection progress. It also allows for on-line
monitoring of actual performance of RRs /RDOs and provides timely management
reports on LNs.

    So far, the system has generated and deployed one thousand eight-hundred seventy-
three (1,873) BOC LNs covering taxable years 2000 to 2002 to various district offices
generating a collection of P 323.441 Million from these LNs.

   The LN monitoring system was piloted at Large Taxpayers Service/ LTDOs and RR
No. 7 – Quezon City (Assessment Division) and RDOs under its area of jurisdiction
on April 30, 2004.

Letter of Authority Monitoring System (LAMS)

    This Monitoring System aims to provide the Bureau with the means to monitor and
control LA issuance from the time it is released by the approving office up to its
termination/closure. This was piloted at the National Investigation Division, LT Audit
and Investigation Division (LTAID) I and LTAID II, LTDO Makati and LTDO Cebu, RR
No. 7- Quezon City and RDOs under its area of jurisdiction and Regional Task Forces.
The pilot scope covered encoding, updating of all LAs issued by the aforementioned
offices from August 26, 2002 and succeeding years.

Payment Data Entry System

     Payment Data Entry System (PDES) is a stand alone data entry program that enables
the non-computerized RDOs to encode their tax returns’ payment data made through
their Revenue Collection Officers (RCOs) and zero payment returns to collectively
ensure that all transactions made through RCOs are processed and accurately accounted
to its respective taxpayer by reconciling it with the RDOs’ registration database thru
their Revenue Data Center (RDC). Through this stand alone system, the Bureau can
monitor and reconcile the collections of the RDOs in areas where there are no AABs.
The encoded payment data will be electronically transferred to their respective RDC
through internet File Transfer Protocol (FTP). The RDCs then use these data to match
against the registered taxpayers of the RDOs in the database to identify potential stop

    PDES has already been rolled out to the following non-computerized sites:

           RDO 03    -   San Fernando, La Union              April 26, 2004
           RDO 04    -   Calasiao, Pangasinan                April 21, 2004
           RDO 05    -   Alaminos, Pangasinan                April 21, 2004
           RDO 08    -   Baguio City                         April 26, 2004
           RDO 58    -   Batangas City                       April 21, 2004
           RDO 59    -   Lipa City                           April 21, 2004
           RDO 60    -   Lucena City                         April 26, 2004
           RDO 67    -   Legaspi City                        April 27, 2004
           RDO 74    -   Iloilo City                         April 30, 2004
           RDO 77    -   Bacolod City                        April 28, 2004
           RDO 93    -   Zamboanga City                      May 04, 2004
           RDO 98    -   Cagayan de Oro City                 May 06, 2004
           RDO 113   -   Davao City                          April 26, 2004

Tax Compliance Verification Drive (TCVD)

    In line with the BIR’s effort to expand its tax base, enhance tax compliance and
consequently boost its tax collection effort, the Commissioner of Internal Revenue
spearheaded actual tax mapping activities under the Tax Compliance Verification
Drive (TCVD) project. This is aimed at establishing cordial relationship with taxpayers
by giving assistance thru tax information drive and verification of taxpayer’s compliance
requirements in terms of actual visitation of taxpayer’s establishment and its branches.

    Thousands of extablishments have already been visited in this Tax Compliance
Verification Drive (TCVD) in the two years of intensified drive. The Bureau collected
a total of P85.976 Million in penalties alone as a result of this program. The amount
of income and business taxes collected reached a high of P204.320 Million from
unregistered taxpayers who thereafter started paying taxes regularly.
The results of the TCVD are as follows:

    a) Taxpayers’ Compliance

                                     As of         As of           As of
                                    May 2003   December 2003   December 2004

   Establishments visited            30,520       221,193           401,841

   Establishments with violations    28,528       171,353           287,857

   % of establishments with          93.5%         77.5%            71.63%
       violations to total
       establishments visited

                                                           The TCVD started in April
                                                      2003. After the first eight
                                                      months, there was 16
                                                      percentage points decrease in
                                                      the        percentage         of
                                                      establishments with violations
                                                      to total establishments visited.
                                                      As of December 2004,
                                                      decrease in non-compliance is
                                                      21.87 percentage points.
   b.) Areas for Closer Monitoring

                                                                 CY 2004

   Total no. of apprehended unregistered                         61,701

   Total no. of unregistered establishments who                  26,647
   registered after apprehension

   Total no. of unregistered establishments who                  12,824
   registered and started paying taxes regularly

   Amount of Income Tax, Business Tax, Withholding               P204.320
   Tax collected from unregistered establihments                 Million
   who started paying taxes regulary

Mobile Revenue Officers System (MROS) Project

     As part of the technical support mechanism in the conduct of the TCVD, 650 blackberry
mobile handheld units were distributed to Revenue Officers nationwide from July to
September 2004. This mobile device has a built-in Mobile Revenue Officers System
(MROS) or an Application Console
relating to TIN Verification, Taxpayer
Information Sheet, Cash Register
Machine, Authority to Print and Violation
List. Through the Blackberry handheld
units, Revenue Officers can: i) record
results of tax mapping activities to a
central database; ii) monitor status of
violations, penalties and payments via a
web browser; iii) register Device
Dispensing Receipts (DDR); iv) record
sales readings that interact with eTIN, ITS-
REG and Collection and Bank
Reconciliation (CBR) systems; and v) generate tax mapping reports for management’s
use. The MROS Project has also provided for convenient frontline service to taxpayers
through the e-REG application system that enables Revenue Officers to provide for
TINs to unregistered individual taxpayers.

  To fully and effectively equip Revenue Officers, training on the use of the blackberry
mobile devices and built-in applications were conducted in various Revenue Regions.

Automated Excise Data Management System (AEDMS)

    The Bureau started the development of the Automated Excise Data Management
System (AEDMS) in 2003 to intensify the administration of excise tax and to provide
excise taxpayers the facility to file their removal declaration through the internet. This
project was developed using a new tool called ASYCUDA WORLD (Automated System
for Customs Data) which is a web-based system used in the management and monitoring
of Excise Taxpayers’ Removal Declaration (ETRD). The system was designed to handle
the on-line approval and generation of ETRD.

    AEDMS was piloted at San Miguel Corporation’s (SMC) Polo Plant in Valenzuela
on July 15, 2004. System fixes are ongoing to address issues during the pilot, arising
from differences in resources, platform and configuration between the Bureau and
SMC systems.

Reclassification of Excise Tax on Cigarettes and Alcohol Brands,
Rationalization of Excise Tax on Automobiles, and New Revised
Tax Rates for Alcohol and Tobacco Products

    The implementation of the prescribed rules and procedures to be observed in the
establishment of the Current Net Retail Price of new brands of alcohol and cigarette
products pursuant to Revenue Regulations No. 9-2003 has resulted to incremental
excise tax collection of P559.28 Million for cigarettes. On the other hand, the increase
in excise tax collection due to rationalization of excise tax on automobiles pursuant to
Republic Act (RA) No. 9224 amounted to P351.38 Million.

   During the latter part of the year, Revenue Regulations No. 12-2004 was issued to
implement RA 9334, otherwise known as “An Act Increasing the Excise Tax Rates
Imposed on Alcohol and Tobacco Products”. The said regulations provide for the revised
tax rates on alcohol and tobacco products introduced on or before December 31,
1996, and for those alcohol and tobacco products covered by Revenue Regulations
Nos. 22-2003 and 23-2003. The increased excise tax rates on alcohol and tobacco
products takes effect on January 1, 2005.

BIR Contact Center

    The BIR Contact Center (BIRCC) was established on August 4, 2003 to enhance
voluntary compliance among taxpayers by making tax information more accessible to
them. The Contact Center is a state-of-the-art facility where taxpayers can immediately
obtain accurate and consistent tax information at a single point of contact number

    Since its implementation, transaction time in the District Level was reduced because
taxpayers, before transacting business with frontline offices, have already been properly
advised by the Contact Center agents on the steps, as well as the BIR requirements
needed on their transactions with BIR. Also, with the general inquiries being given by
the Contact Center, volume of calls in district offices were reduced thus enabling them
to give more quality time to attend to walk-in taxpayers.

   A total of 239,747 queries through Voice Over Internet Protocol (VOIP) and email
were received this year and 219, 665 or 92% of these queries were answered:

                    No. of calls handled                -       136,020
                    No. of emails answered              -        16,789
                    No. of calls serviced by IVRS* -             66,856
                    *Interactive Voice Response System (IVRS)
Effective Detection and Elimination
of Revenue Leakages

   In its effort to maximize revenue collection, the Bureau has institutionalized
Programs that prevent possible leakages in tax collection.

Third Party Information - Reconciliation of Listings for
Enforcement (TPI-RELIEF)

    The Bureau strengthened its traditional assessment functions with the
implementation of its RELIEF System in CY 2002. Under the system, information/data
provided by VAT-registered taxpayers through their submission of Summary Lists of
Sales and Purchases (SLSP) are consolidated and matched with tax declarations filed
with the BIR in order to detect possible underdeclared revenues or overclaimed costs
and expenses.

    The collection generated from assessments under the RELIEF System using SLSP
data has amounted to P242.101 Million since its implementation during the latter part
of CY 2002.

External Linkages with Government Agencies

    The Bureau entered into a Memoranda of Agreement (MOA) with various
government agencies, e.g. Bureau of Customs (BOC), Securities and Exchange
Commission (SEC), for the purpose of enhancing inter-agency cooperation through
electronic exchange of information.
    Currently, data extracted from the BOC are being stored and matched with the
data available under the BIR’s Integrated Tax System. The guidelines and procedures in
extracting and analyzing the matched data are provided in Revenue Memorandum
Order No. 34-2004.

TPI-RELIEF: First no contact audit system
TPI-RELIEF: First no contact audit system

    Under implementing guidelines to the electronic exchange of information between
BIR and SEC, the two agencies have agreed to share information on companies that
register with the Commission in a bid to tighten the noose on corporate tax evaders.
This link-up is meant to help the BIR harness TPI to determine firms’ level of compliance
with tax rules. Said guidelines were issued on November 19, 2004.

    Under the set-up, the BIR will give SEC pre-generated Taxpayer Identification
Numbers (TINs) which it will automatically assign to registering companies prior to
the issuance of the Certificate of Registration. Initially, the BIR shall issue SEC 4,000
pre-generated TINs which shall be subject to replenishment. BIR shall also furnish
SEC, upon request, copies of the latest BIR regulations, rulings, tax issuances, among

    In return, SEC will electronically transmit to BIR the list of new SEC registrants
along with other information, such as the name and address of the corporation, date of
incorporation, contact person and number, names of incorporators and shareholdings,
among others.

    Future linkages will be done with Land Transportation Office (LTO)/Land
Transportation Franchising Regulatory Board (LTFRB) and with the Department of
Finance (DOF).

Delinquent Accounts Management

   This Program aims to increase collections from delinquent accounts by conducting
analysis, evaluation, aging and classification of all delinquent accounts.

   Intensified efforts resulted in collection from taxpayers who availed of compromise/
abatement privileges, and for those who failed to avail, summary and/or judicial
remedies were immediately applied.

    Taxpayers with outstanding accounts receivable and disputed assessments were
given the opportunity to settle their tax liabilities. As a result, the Bureau was able to
collect P152.398 Million from 17,919 cases.
I   Intensified Enforcement

        With the increasing amount of revenue target assigned yearly, the Bureau
    has undertaken major initiatives to uncover possible sources of revenues,
    strengthen and rationalize BIR’s audit process and other enforcement methods.

    Special Operations on Water Districts, Electric Utilities,
    Motels and Pawnshops
        Various revenue issuances were issued to increase tax collections and enhance
    the monitoring of some identified low compliance sectors, such as Water Districts,
    Electric Utilities, Motels, and Pawnshops, to wit:
        • Revenue Memorandum Circular No. 39-2004 - this provides for the settlement
    of the income and franchise tax liabilities of local water districts organized under
    Presidential Decree No. 198 for taxable years 1996 to 2002.
       • Revenue Memorandum Circular No. 72-2003 - this provides for the tax
    implications of electric cooperatives registered with the National Electrification
    Administration and Cooperative Development Authority.
       • Revenue Memorandum Order No. 32-2004 - this prescribes the guidelines
    and enforcement measures to determine the correct tax liability of motels.
        • Revenue Memorandum Circular No. 37-2004 - this clarifies the settlement of
    the value-added tax liabilities of pawnshops for taxable years 1996 to 2002.

    Tax Evasion and Criminal Cases
         BIR personnel conducted months of rigid investigation and research in gathering
    enough documents to have strong evidence to prosecute tax cheats and put them to
    jail, if found guilty.

       This year, a total of fifty-five (55) tax evasion cases for unpaid or delinquent taxes
    were filed in the Department of Justice (DOJ) and in various Prosecutor’s Offices.
    These tax evasion cases involved an estimated amount of P1.505 Billion.

       Consequently, Memoranda of Agreement (MOA) were signed between the BIR
    and each of four (4) top law schools from the National Capital Region: 1) UP College
of Law; 2) Arellano Law School; 3) FEU
College of Law; and 4) Ateneo de Manila
University Law School. These schools will
assist the Bureau in providing research
materials, case study reports and
jurisprudence pertaining to tax cases. On
the Bureau’s end, necessary training to
law student volunteers shall be provided
by BIR lawyers. They will be given the
opportunity to appear before the various
Prosecutor’s Offices and Courts within
Metro Manila during preliminary

Enforcement Revenues

    As in previous years, audit and
investigation on tax fraud cases is a
priority program of the BIR. Aside from the regular tax fraud cases, the audit and
investigation on cases involving those under the Task Forces on Interrelated Companies,
Sugar Traders, and Independent Power Producers were conducted through the issuance
of Letters of Authority (LAs). The collection amounted to P1.116 Billion from four
hundred twenty-two (422) cases closed.

                                            No. of Cases         Amount of
                                              Closed             Collection

       1. Regular Tax Fraud                     157           P 363.963 Million

       2. Task force on Interrelated            82            P 237.855 Million

       3. Task Force on Sugar Traders           177           P 214.203 Million

       4. Task Force on Independent              6            P 300.036 Million
          Power Producers

          Total                                 422          P 1,116.057 Million
Business Intelligence Task Force

     Since the start of the VAT System in 1988, many sectors have recognized leakages
in the System and areas for improvement in the implementation. In CY 2002, the Bureau
was prompted to implement the RELIEF Program in order to address the underdeclaration
of sales and purchases; and, consequently, to collect unpaid taxes on VAT, income
tax, and other applicable taxes.

      With the success of the RELIEF Program, the BIR decided to enhance its original
data-matching project with the implementation of the Business Intelligence Project
launched in August 2004. The Business Intelligence Task Force (BITF) was created
through Revenue Special Order Nos. 293-2004, 360-2004 and 430-2004. The Task
Force shall be responsible for: i) Ensuring maximized usage of BIR data as well as third
party information from various sources; ii) Coming up with projects involving Analysis
of Data through Data Mining to generate increase in revenue collection; and
iii) Ensuring completion and closure of projects started in the area of Data Mining and
Data Exploration making sure that full benefits from the projects are achieved.

      The BITF is composed of teams centered on exploring data for revenue collection
purposes, which include: i) Summary List of Sales (SLS)/Summary List of Purchases
(SLP)–RELIEF; ii) Bureau of Customs (BOC)–Data on Importations;
iii) Telecommunication companies; iv) BIR-Securities and Exchange Commission (SEC)
Data Linkage; v) Government Contractors; vi) Credit Card companies and their merchants;
vii) Educational Institutions/ Foundations/Religious Organizations; viii) Manpower Services
(Security Agencies and Janitorial Services); ix) Stockbrokers; x) Theaters; xi) Banks; and
xii) Insurance Companies.

   A total of P1.305 Billion has already been collected for this year from some of the
above sources.
BIR-Private Sector Good and Honest
Governance Program

     To enhance the social responsibility of taxpayers, the Bureau entered into mutual
agreement with certain private sector groups. The involvement of the private sector
in tax information dissemination and education portrays to the public an environment
of teamwork and transparency.

2004 Tax Campaign

    The BIR, led by Commissioner Parayno, launched its annual tax campaign kick-off
through partnership with the private sector to increase taxpayer compliance for the
attainment of the BIR revenue target of P476.31 Billion for CY 2004.

    All the nineteen (19) Revenue Regions, together with their respective Revenue
District Offices and Large Taxpayers Service, conducted their own tax campaign kick-
off ceremonies as well as the launching of the BIR’s Centennial celebration. During
these ceremonies, Certificates of Recognition were given to various taxpayers who
extended their all-out support and cooperation by paying the right taxes and by helping
promote the various programs/projects of the BIR.

Taxpayer Information and
Education Program

    Quality service and accurate
information to the taxpayers have always
been the priority of the Bureau through
its continuous tax information,
education, and assistance programs
being rendered to the taxpayers.
                                         This year, another milestone is the
                                     inauguration of eLounges located at RR Nos. 6-
                                     Manila, 7-Quezon City and 8-Makati. The
                                     eLounge provides the taxpayers with free internet
                                     access to the Bureau’s various eServices such
                                     as eFPS, ePayees, eRELIEF and eTIN, through the
                                     use of the BIR’s top-of-the-line personal
                                     computers. These taxpayers can update their
                                     records online or prepare their tax returns/data
                                     for online submission.

                                          The BIR has also conducted various
symposium and consultation meetings for selected sectors. During the symposium for
medical practitioners, participants from five of Metro Manila’s major hospitals were
enlightened on the medical profession’s tax compliance profile; the linkages between
the BIR and members of the medical profession; the importance of encouraging their
fellow doctors to improve their tax compliance; and the importance of their tax
obligations and the consequences of any failure to fulfill these responsibilities.

                                                         There       were      also
                                                      consultative meetings with
                                                      companies/dealers        and
                                                      Security Agencies to further
                                                      encourage         voluntary
                                                      compliance of these sectors.

Centennial Taxpayers Recognition Program (CTRP)

    To enhance voluntary tax compliance among taxpayers and also to recognize those
who have given significant contribution in the government’s development programs,
the Centennial Taxpayers Recognition Program (CTRP) was launched on March 2.
    In line with this program, Revenue Memorandum Order No. 7 – 2004 and other
related issuances were issued which provide the criteria for those who want to avail of
the CTRP. The program covered all corporations and individuals engaged in business
following the calendar year of reporting.

    Following the launching of the CTRP, various organizations pledged their support
through signing of the Agreement of Cooperation and Endorsement with the BIR. These
organizations include: Lina Group of Companies; Association of Certified Public
Accountants in Public Service; Philippine Institute of Certified Public Accountants;
Rotary Club International; Tax Management Association of the Philippines; Makati
Business Club; Chinese-Filipino Business Club; Philippine Chamber of Commerce
and Industry; Philippine Chinese Charitable Association, Inc.; Filipino-Chinese General
Chamber of Commerce;
Federation of Filipino-Chinese
Chamber of Commerce and
Industry, Inc.; Philippine
Exporter       Confederation;
Philippine            Ecozones
Association;            Bankers
Association of the Philippines;
and Integrated Bar of the
    The program successfully generated more than P5.212 Billion collection. During
the BIR Centennial Anniversary Celebration, the following Top 20 Centennial Taxpayers
were recognized: SM Prime Holdings, Inc; GMA Network, Inc.; Bauang Private Power
Corporation; CE Cebu Geothermal Power Company; United Laboratories, Inc.; Amkor
Technology Philippines; China Airlines Ltd.; Texas Instruments (Phils.) Inc.; Moneyline
Lending Investors, Inc.; La Filipina Uy Gongco Corp.; Aventis Pasteur Phils., Inc.;
Acnielsen (Phils.) Inc.; Maersk Filipinas, Inc.; Alabang Commercial Corporation; 6750
Ayala Avenue Joint Venture; Taganito Mining Corporation; Southeast Asia Food, Inc.;
Hocheng Philippines Corporation; Smart Communications, Inc.; and Corinthian
Commercial Corporation.

    On November 22, during the Monday Flag Raising Ceremonies at the National
Office, the Bureau started giving recognition to centennial taxpayers by awarding the
Centennial Certificate and a commemorative Centennial TAXPAYER car plate to SM
Prime Holdings, Inc. of the Large Taxpayers Service, which topped the more than
5,000 taxpayers who participated. In the regional offices, the CTRP qualifiers were
awarded their certificates in appropriate ceremonies in their respective jurisdictions.
Organizational Adjustments

     The organization of the Bureau influences the efficiency and effectiveness of the
utilization of its resources. Hence, the Bureau has implemented programs to upgrade
personnel skills and service motivation and focus on core competencies.

Personnel Integrity Program
    The Personnel Integrity Program aims to safeguard the integrity of the revenue
workforce and protect the public interest. This program involves the conduct of quality
investigation on administrative cases involving erring revenue personnel.

    In order to maintain the integrity and upgrade professionalism of human resources,
seventy-three (73) formal charges were filed against erring revenue personnel for various
offenses, broken down as follows:

                            CASES FILED               NO.
                            Graft-related             29
                            Non-graft related         44
                            TOTAL                     73*
                            *Involves 71 personnel

   Administrative cases were decided with finality during the year for which maximum
penalty of dismissal, as confirmed by the Department of Finance, was imposed on
twenty-two (22) personnel. These decided cases are as follows:

                        PENALTY IMPOSED                  NO.
                        Dismissal                         22
                        Suspension                        21
                        Exonerated/Cases Dismissed*        8
                        Reprimand                         25
                        Fined                              4
                        TOTAL                             80
                        *As approved by CIR
Outsourcing of Certain IT Operations

    In the mid 1990s, the Bureau set up much of its core IT Infrastructure thru the
development of the Integrated Tax System (ITS). However, over the years, the Bureau’s
ability to hire and retain highly qualified technical personnel to operate, manage and
maintain the ITS has been constrained. Likewise, the roll-out of the functional capability
of the ITS and the upgrade of its infrastructure have been gravely affected by limited
resources available for software development/maintenance and hardware provisioning/
operation. Thus, faced with these constraints, the outsourcing of certain IT operations
was undertaken.

    The BIR IT Outsourcing Initiative consists of four (4) Lots, namely:

    • Lot A - Project and Contract Management which provides consulting, technical
and management services necessary to assist BIR in the implementation of the
outsourcing initiative projects. The contract for this Lot has been awarded to Laya
Mananghaya KPMG.
    • Lot B - Application Development and Maintenance, which covers the upgrade
of BIR current tax applications to a multi-tier web-based architecture and the delivery
and deployment of new application modules. The contract for this Lot has been awarded
to Admired Technologies, Inc.
    • Lot C - Data Center Services, which include hosting, provision, operation and
maintenance of data processing, electronic storage and network facilities to meet the
Bureau’s requirements. The contract for this Lot has been awarded to the joint venture
of Sun Phils, Inc., ePLDT and Philcox Inc.
    • Lot D - Data Capture Project which shall provide all necessary services,
equipment, systems, technology and schemes in order to convert input data from paper
to electronic form for the various tax applications. This Lot was transferred to
Procurement Service of the Department of Budget and Management for implementation
in CY 2005.

         Two hundred seventy-four (274) training courses were conducted by the Bureau to
     raise its personnel’s capabilities and to be at par with the fast paced advancement of
     technology. Notably, training courses under the Information Technology (IT) were
     intensified so that Revenue officials and employees can capitalize on the computerization
     efforts of tax administration.

        The Bureau was also able to
     coordinate the participation of selected
     Revenue Officials/Personnel to thirteen
     (13) training/seminars/study tours in
     Malaysia, Singapore, China, India,
     Taiwan, Japan, and the United States.

                                                                 No. of            No. of
                   Training Courses                             Conducts        Participants

               1. Regular Training Programs                         26              1,070

               2. IT Courses                                        51              1,648

               3. Seminars/Activities of Revenue Services          146              8,050

               4. Seminars/Conferences outside the Bureau           45               167

               5. Training in Regions outside Metro Manila          6                40

                 TOTAL                                             274             10,975

44                                            2004 ANNUAL REPORT
                                    Personnel Complement

                                This year, the BIR workforce reached 11,602. This is
                             0.51% higher compared to previous year’s personnel
                             complement of 11,543.

                             National Office   Regional Office         Total
                            2003        2004    2003     2004      2003        2004

1. Management                201         193     415      419       616         612
2. Assessment                326         279   2,232     2,267     2,558       2,546
3. Collection                157         170   2,354     2,341     2,511       2,511
4. Excise                    285         145      18      140       303         285
5. Document Processing       151        152      972      955      1,123       1,107
6. Information Technology    681         703   1,625     1,666     2,306       2,369
7. Legal and Inspection       74          78     188      181       262         259
8. Taxpayer Assistance        15          18     160      158       175         176
9. Administrative            584         675   1,105     1,062     1,689       1,737
Total                       2,474     2,413    9,069     9,189    11,543   11,602

BUREAU OF INTERNAL REVENUE                                                             45
     Cost of Operations

          The CY 2004 total expenditure of the Bureau amounted to P3.885 Billion compared
     to last year’s P3.536 Billion. The main bulk of the operations cost came from Personal
     Services which comprised 65.27% of the total obligations.

        Cost to collect for every P100 revenue is P0.83 with the Bureau’s collection of
     P468.18 Billion during the year. Said cost is the same as last year’s cost to collect.

                   (In Million Pesos)

                   Item of Expenditure                Total              Percent

                   Personal Services               P 2,535.423            65.27%
                   Maintenance and                   1,226.882            31.58%
                   Other Operating Expenses
                   Financial Expenses                 019.831              0.51%
                   Capital Outlay                     102.469              2.64%

                   Total                           P 3,884.605             100%

46                                         2004 ANNUAL REPORT
2        2004 Revenue Regulations

NO. OF                                                                                             DATE
ISSUANCE                                  SUBJECT MATTER                                           OF ISSUE

RR No.     Amending Further Sec. 2.57.2(S) of Revenue Regulations No. 2-98, as Last Amended        Jan. 14, 2004
1-2004     By Revenue Regulations No. 30-2003, Exempting Marginal Income Earners From
           Creditable Withholding Tax on Payments Made By Hotels, Restaurants, Resorts,
           Caterers, Food Processors, Canneries, Supermarkets, Livestock, Poultry, Fish and
           Marine Product Dealers, Hardwares, Factories, Furniture Shops, and All Other

RR No.     Further Enhancing the Rules on the Advance Payment of Value Added Tax on Sale of        Jan. 2, 2004
2-2004     Refined Sugar, Amending Revenue Regulations No. 7-89 and 29-2002.

RR No.     Suspending the implementation of withholding tax on income payments made to suppliers   March 1, 2004
3-2004     of agricultural products under Section 2.57.2(S) of Revenue Regulations No. 2-98, as
           amended by Revenue Regulations No. 17-2003, further amended by Revenue
           Regulations No. 30-2003 and 1-2004.

RR No.     Supplementing the Rules on the Advance Payment of Value Added Tax on Sale of            April 22, 2004
4-2004     Refined Sugar as Provided for in Revenue Regulations No. 2-2004.

RR No.     Amending Further Revenue Regulations No. 9-2001, as Amended by Revenue                  April 26, 2004
5-2004     Regulations No. 2-2002, Revenue Regulations No. 9-2002 and Revenue Regulations
           No. 26-2002, Providing for Additional Tax Return/Forms Which Shall be Filed thru the
           Electronic Filing and Payment System (EFPS), Revising the Requirements for Enrollment
           of Taxpayers, and Expanding the Coverage Thereof to Include the Top 10,000 Private
           Corporations Duly Identified Under Revenue Regulations No. 17-2003.

RR No.     Implementing the Tax Exemptions and Privileges Granted Under Republic Act No.           May 31, 2004
6-2004     9182, Otherwise Known As “The Special Purpose Vehicle (SPV) Act of 2002.”

         BUREAU OF INTERNAL REVENUE                                                                                 47
     NO. OF                                                                                  DATE
     ISSUANCE                             SUBJECT MATTER                                     OF ISSUE

     RR No.     Implementing Section 109(bb) and (cc) of the National Internal Revenue       May 7, 2004
     7-2004     Code, as Amended by Republic Act No. 9238, Excluding Services
                Rendered by Doctors of Medicine duly registered with the Professional
                Regulatory Commission (PRC), and Services Rendered by Lawyers
                Duly Registered with the Integrated Bar of the Philippines (IBP) from the
                Coverage of Value Added Tax.

     RR No.     Revenue Regulations Implementing Sections 7(c), 204(A) and 290 of the        May 19, 2004
     8-2004     National Internal Revenue Code of 1997 on Compromise Settlement of
                Internal Revenue Tax Liabilities Superseding Revenue Regulations Nos.
                7-2001 and 30-2002.

     RR No.     Implementing Certain Provisions of Republic Act No. 9238, Re-Imposing        June 21, 2004
     9-2004     the Gross Receipts Tax on Other Non-bank Financial Intermediaries
                beginning January 1, 2004.

     RR No.     To Further Implement the Provisions of Sec. 4 of Republic Act No. 9238       Oct.18, 2004
     10-2004    Re-imposing the Gross Receipts Tax on Other Non-bank Financial
                Intermediaries Beginning January 1, 2004 and Hereby Amending for the
                Purpose Sec. 4 of Revenue Regulations No. 9-2004 by Including
                Pawnshops Under the Classification of Other Non-bank Financial

     RR No.     Rules and Regulations on the Accreditation, Registration and Use of Cash     Dec. 15, 2004
     11-2004    Register Machines (CRM), Point-of-Sale (POS) Machines and/or
                Business Machines Generating Receipts/Invoices.

     RR No.     Providing for the Revised Tax Rates on Alcohol and Tobacco Products          Dec. 28, 2004
     12-2004    Introduced on or before December 31, 1996, and for Those Alcohol and
                Tobacco Products Covered by Revenue Regulations No. 22-2003 and
                23-2003, Implementing Republic Act No. 9334, otherwise known as “An
                Act Increasing the Excise Tax Rates Imposed on Alcohol and Tobacco
                Products, Amending for the Purpose Sections 131, 141, 142, 143, 144,
                145, and 288 of the National Internal Revenue Code of 1997, as Amended.”

     RR No.     Implementing the Provisions of Republic Act No. 9243, An Act Rationalizing   Dec. 23, 2004
     13-2004    the Provisions on the Documentary Stamp Tax of the National Internal
                Revenue Code of 1997, as Amended, and for Other Purposes.”

48                                       2004 ANNUAL REPORT
                          TABLE I
                                                 (In Million Pesos)

                         BIR COLLECTIONS                             GDP In Current Prices
  YEAR                                                                                               TAX EFFORT
                    Amount            Growth Rates              AMOUNT                Growth Rates
                                         %                                                 %

   2004           P 468,177              9.90                   4,739,140                 12.56         9.88

   2003              426,010             7.97                   4,210,505                  8.43        10.12
   2002              394,549              1.51                  3,883,230                  6.93        10.16

   2001              388,679              7.73                  3,631,474                  8.25        10.70
   2000              360,802             5.71                   3,354,727                 12.69        10.76

   1999              341,320              1.23                  2,976,904                 11.70        11.47

   1998              337,177              7.14                  2,665,060                 10.07        12.65
   1997              314,697            20.68                   2,421,306                 11.48        13.00

   1996              260,774            23.32                   2,171,922                 13.93        12.01

   1995              211,462            12.81                   1,906,328                 12.61        11.09
 Average                                  9.80                                            10.86        11.18

1. Tax Effort is the ratio of collections to Gross Domestic Product at Current Prices.
2. Source of GDP data (2000-2004): Revised National Accounts of the Philippines, as of May 2005

   BUREAU OF INTERNAL REVENUE                                                                                     49
                            TABLE II
                          CY 1995-2004
                                                  (In Million Pesos)

                                                                       Other Agencies    BIR Share in
                         National                        BIR           Share in Gov’t.    Gov’t. Tax
         Year         Government Tax                 Collections       Tax Revenues        Revenue
                        Revenues                                             (%)              %

          2004             P 597,911                  P 468,177             21.70            78.30
          2003               538,019                       426,010          20.82            79.18

          2002               496,372                       394,549          20.51            79.49

          2001               489,859                       388,679          20.65            79.35
          2000               460,034                       360,802          21.57            78.43

          1999               478,502                       341,320          28.67            71.33
          1998               416,585                       337,177          19.06            80.94

          1997               412,165                       314,698          23.65            76.35

          1996               367,894                       260,774          29.12            70.88
          1995               310,517                       211,462          31.90            68.10

     Source: Cash Operations Reports, Bureau of Treasury

50                                                         2004 ANNUAL REPORT
                             TABLE III
                     VOLUME OF REMOVALS ON
                              CY 2004

             Products                                                              CY 2004


        Fermented Liquors (gauge liters)                                   1,558,079,241.50
        Distilled Spirits (proof liters)                                     295,817,074.23
          a) Alcohol Plants                                                   85,798,602.75
          b) Rectifiers                                                      210,018,471.48

         Cigars (in pieces)                                                    2,260,204.00
         Cigarettes (in packs)                                             4,829,833,650.00
           Packed in 30’s
              P0.40                                                           50,510,250.00
           Packed in 20’s
              P1.12                                                        2,126,513,500.00
              P5.60                                                        1,030,560,000.00
              P8.96                                                        1,622,249,900.00
         Tobacco (Inspection, Mon. Fees & Others)                        107,710,139,500.00
         Other Tobacco Products                                                8,749,367.27

        Premium                                                            1,382,140,020.00
        Unleaded                                                              80,617,627.00
        Regular                                                              886,111,810.00
        Kerosene                                                             286,509,815.00
        Diesel                                                             3,325,968,105.00
        AvTurbo                                                              117,986,757.00
        Fuel Oil                                                           2,030,357,376.00
        Lube Oil                                                                  22,070.00
        Asphalts                                                               2,202,427.00
        LVGO                                                                     224,000.00

        Non-Essential                                                        14,136,271.00
        Automobiles                                                              45,020.00

   * Source: Large Taxpayers Programs Division (as of January 2, 2005)

BUREAU OF INTERNAL REVENUE                                                                    51
                           TABLE IV
                        CY 2004 & 2003

             TAX CLASSIFICATION                                                COLLECTION                      GOAL
                                                                                                            P 476,306 M

                  TOTAL                                                    P 468,176,583,044.28            476,306,000,000.00

        I.   TAXES ON NET INCOME AND PROFIT                                P 278,213,654,056.10            278,848,000,000.00

             A.   Company, corporate enterprise                               131,168,327,004.11           128,242,000,000.00
                  1. Corporate                                                 59,677,459,402.04            62,454,801,000.00
                  2. Withholding at source                                     71,490,867,602.07            65,787,199,000.00
             B.   Individual                                                  100,918,986,044.35            98,909,000,000.00
                  1. Individual                                                 4,854,856,346.82             3,435,959,000.00
                  2. Withholding on wages                                      84,289,795,906.20            83,191,287,000.00
                  3. Capital Gains                                              4,220,589,591.04             4,777,000,000.00
                  4. Withholding at source                                      7,553,744,200.29             7,504,754,000.00
             C.   Others                                                       46,126,341,007.64            51,697,000,000.00
                  1. Bank Deposits                                             13,906,416,535.50            18,163,000,000.00
                  2. Treasury Bills                                            32,219,924,472.14            33,534,000,000.00

       II.   EXCISE TAXES                                                  P 59,529,619,879.48             51,624,000,000.00

                  1.   Alcohol Products                                        15,974,377,039.79           13,862,000,000.00
                  2.   Tobacco Products                                        23,061,633,031.39           21,537,000,000.00
                  3.   Petroleum Products                                      18,208,611,648.20           13,965,000,000.00
                  4.   Miscellaneous Products                                   2,052,114,081.67            2,045,000,000.00
                  5.   Mining/Mineral Products                                    232,495,211.80              191,000,000.00
                  6.   Tobacco Inspection Fee                                         388,866.63               24,000,000.00

      III.   VALUE-ADDED TAXES                                             P 80,216,033,075.78             93,727,000,000.00

      IV.    PERCENTAGE TAXES                                              P 27,952,214,713.92             21,026,000,000.00

                  1.   Banks/Financial Institution                             10,322,917,199.24            3,745,000,000.00
                  2.   Insurance premiums                                       1,136,297,801.02            1,388,000,000.00
                  3.   Amusement                                                  124,960,914.78              361,000,000.00
                  4.   Other Percentage Taxes                                  14,884,211,159.00           14,154,000,000.00
                  5.   Taxes on use of goods or permission
                       to perform activities (Franchise Tax)                    1,483,827,639.87             1,378,000,000.00

       V.    OTHER TAXES                                                   P 22,265,061,319.01             31,081,000,000.00

                  1.   Transfer Taxes                                             749,515,988.03              760,000,000.00
                  2.   Documentary Stamp Tax                                   18,167,426,186.79           25,387,000,000.00
                  3.   Travel Tax                                                 245,440,284.00              487,000,000.00
                  4.   Miscellaneous                                            3,102,678,860.19            4,447,000,000.00

     Breakdown of collection by major source is based on BIR Form No. 1209 (as of April 28, 2005)
     Excise Tax Collection based on LT-DPQAD Report (as of January 21, 2005)
     Tax on T-Bills based on BTR-NCAD as of April 28, 2005
     Goal based on RMO No. 6-2004

52                                        2004 ANNUAL REPORT
                            Collection compared to Goal       Collection compared to Prev. Year
    2003                      EXCESS/(DEFICIENCY)                  INCREASE/(DECREASE)
                                  AMOUNT            (%)              AMOUNT           (%)

426,010,478,820.03        (8,129,416,955.72)        (1.71)   42,166,104,224.25        9.90

244,128,275,050.71         (634,345,943.90)         (0.23)   34,085,379,005.38       13.96

112,356,112,874.12          2,926,327,004.11         2.28    18,812,214,129.99       16.74
54,664,144,738.74         (2,777,341,597.96)        (4.45)    5,013,314,663.30        9.17
57,691,968,135.37           5,703,668,602.07         8.67    13,798,899,466.70       23.92
 91,361,581,389.55          2,009,986,044.35         2.03     9,557,404,654.80       10.46
   3,713,334,191.45         1,418,897,346.82        41.30     1,141,522,155.37       30.74
76,671,815,690.15           1,098,508,906.20         1.32     7,617,980,216.05        9.94
  4,102,950,280.83          (556,410,408.96)       (11.65)      117,639,310.21        2.87
  6,873,481,227.12             48,990,200.29         0.65       680,262,973.16        9.90
 40,410,580,787.05        (5,570,658,992.36)       (10.78)    5,715,760,220.59       14.14
 12,418,673,546.20        (4,256,583,464.50)       (23.44)    1,487,742,989.30       11.98
27,991,907,240.85         (1,314,075,527.86)        (3.92)    4,228,017,231.29       15.10

 57,042,059,715.31         7,905,619,879.48         15.31     2,487,560,164.17        4.36

 13,866,040,238.70         2,112,377,039.79         15.24      2,108,336,801.09      15.21
19,971,951,430.31          1,524,633,031.39          7.08      3,089,681,601.08      15.47
21,342,535,151.42          4,243,611,648.20         30.39    (3,133,923,503.22)     (14.68)
 1,685,253,881.54               7,114,081.67         0.35        366,860,200.13      21.77
   155,771,824.74              41,495,211.80        21.73          76,723,387.06     49.25
    20,507,188.60            (23,611,133.37)       (98.38)       (20,118,321.97)    (98.10)

 82,633,263,291.89       (13,510,966,924.22)       (14.42)   (2,417,230,216.11)      (2.93)

 18,894,154,481.58         6,926,214,713.92         32.94     9,058,060,232.34       47.94

  3,071,061,707.79         6,577,917,199.24        175.65     7,251,855,491.46      236.14
 1,294,939,133.38          (251,702,198.98)        (18.13)    (158,641,332.36)      (12.25)
   341,657,085.46          (236,039,085.22)        (65.38)    (216,696,170.68)      (63.43)
13,058,239,630.85            730,211,159.00          5.16     1,825,971,528.14       13.98

 1,128,256,924.10            105,827,639.87          7.68       355,570,715.78       31.52

 23,312,726,280.54        (8,815,938,680.99)       (28.36)   (1,047,664,961.53)      (4.49)

    714,544,902.75            (10,484,011.97)       (1.38)        34,971,085.28       4.89
17,920,577,307.89         (7,219,573,813.21)       (28.44)       246,848,878.89       1.38
   360,822,385.30           (241,559,716.00)       (49.60)     (115,382,101.30)     (31.98)
 4,316,781,684.59         (1,344,321,139.81)       (30.23)   (1,214,102,824.40)     (28.13)

                      BUREAU OF INTERNAL REVENUE                                                  53
                            TABLE V
                   BY IMPLEMENTING GROUP
                       ( CY 2004 & 2003 )

                                                                             % SHARE OF                                        CY 2004
     IMPLEMENTING GROUPS                                     RANK             TO TOTAL                            COLLECTION               GOAL

      TOTAL                                                                         100.00                    P 469,587,364,030.24   476,306,000,000.00

       1     Calasiao, Pangasinan                                10                    0.69                     P 3,222,274,464.63     3,120,469,000.00
       2     Cordillera Adm. Region                              17                    0.43                       2,012,503,296.66     2,000,572,000.00
       3     Tuguegarao, Cagayan                                 19                    0.31                       1,458,714,410.94     1,598,265,000.00
       4     San Fernando, Pampanga                               7                    1.38                       6,478,017,335.10     6,506,365,000.00
       5     Valenzuela                                           6                    1.44                       6,784,806,107.83     7,172,902,000.00
       6     Manila                                               2                   10.94                      51,365,234,529.79    58,205,583,000.00
       7     Quezon City                                          4                    9.12                      42,844,425,782.36    43,545,118,000.00
       8     Makati                                               3                   10.12                      47,513,860,935.97    46,792,083,000.00
       9     San Pablo City                                       5                    4.40                      20,667,509,491.64    20,317,892,000.00
      10     Legaspi City                                        15                    0.47                       2,184,814,622.81     2,280,274,000.00
      11     Iloilo City                                         12                    0.68                       3,206,644,397.27     3,054,756,000.00
      12     Bacolod City                                        14                    0.57                       2,660,556,272.22     2,593,961,000.00
      13     Cebu City                                            8                    1.26                       5,893,635,312.31     5,718,401,000.00
      14     Tacloban City                                       13                    0.62                       2,928,028,797.80     2,248,551,000.00
      15     Zamboanga City                                      18                    0.33                       1,535,085,247.93     1,556,655,000.00
      16     Cagayan de Oro City                                 11                    0.69                       3,221,071,133.78     3,319,419,000.00
      17     Butuan City                                         20                    0.26                       1,219,070,094.18     1,232,551,000.00
      18     Cotabato City                                       16                    0.43                       2,025,219,754.34     1,979,042,000.00
      19     Davao City                                           9                    0.93                       4,354,968,061.04     4,257,809,000.00
      20     National Office                                      1                   54.94                     258,010,923,981.64   258,805,332,000.00

     Note: Based on tentative BIR 12.09 report from Revenue Accounting Division (RAD) as of April 28, 2005.

54                                                         2004 ANNUAL REPORT
    CY 2003
                          AMOUNT            (%)           AMOUNT           (%)

426,515,473,391.93   (6,718,635,969.76)     (1.41)   43,071,890,638.31    10.10

  2,805,274,557.39       101,805,464.63      3.26        416,999,907.24   14.86
  1,737,805,922.36        11,931,296.66      0.60        274,697,374.30   15.81
  1,425,671,592.85     (139,550,589.06)     (8.73)        33,042,818.09    2.32
  5,714,015,686.01      (28,347,664.90)     (0.44)       764,001,649.09   13.37
  6,045,567,154.09     (388,095,892.17)     (5.41)       739,238,953.74   12.23
 53,613,984,805.42   (6,840,348,470.21)    (11.75)   (2,248,750,275.63)   (4.19)
 37,906,294,245.38     (700,692,217.64)     (1.61)     4,938,131,536.98   13.03
 41,449,882,139.49       721,777,935.97      1.54      6,063,978,796.48   14.63
 17,568,052,045.23       349,617,491.64      1.72      3,099,457,446.42   17.64
  2,038,355,130.57      (95,459,377.19)     (4.19)       146,459,492.24    7.19
  2,762,400,141.83       151,888,397.27      4.97        444,244,255.44   16.08
  2,261,905,980.75        66,595,272.22      2.57        398,650,291.47   17.62
  5,150,347,208.27       175,234,312.31      3.06        743,288,104.04   14.43
  2,417,177,746.96       679,477,797.80     30.22        510,851,050.84   21.13
  1,423,946,979.55      (21,569,752.07)     (1.39)       111,138,268.38    7.80
  2,953,656,002.26      (98,347,866.22)     (2.96)       267,415,131.52    9.05
  1,118,256,806.48      (13,480,905.82)     (1.09)       100,813,287.70    9.02
  1,744,449,690.92        46,177,754.34      2.33        280,770,063.42   16.10
  3,783,959,520.64        97,159,061.04      2.28        571,008,540.40   15.09
232,594,470,035.48     (794,408,018.36)     (0.31)   25,416,453,946.16    10.93

                BUREAU OF INTERNAL REVENUE                                         55
                                        TABLE VI
                            COLLECTION BY MANNER OF PAYMENT
                                         CY 2004

                                            VOLUNTARY            PRELIMINARY/ FINAL          DELINQUENT           TOTAL GROSS
          IMPLEMENTING GROUP                 PAYMENTS               ASSESSMENTS               ACCOUNTS            COLLECTIONS

      1   Calasiao, Pangasinan          P 3,149,482,077.66             66,438,004.66          6,354,382.31        3,222,274,464.63
      2   Cordillera Adm. Region            2,005,447,501.42            3,706,139.80          3,349,655.44        2,012,503,296.66
      3   Tuguegarao, Cagayan               1,445,553,492.51            4,534,764.09          8,626,154.34        1,458,714,410.94
      4   San Fernando, Pampanga            6,405,399,212.07           57,039,396.61         15,578,726.42        6,478,017,335.10
      5   Valenzuela                        6,717,719,314.44           61,796,749.80          5,290,043.59        6,784,806,107.83
      6   Manila                           51,315,505,568.37           31,633,259.96         18,095,701.46       51,365,234,529.79
      7   Quezon City                      42,594,488,010.28         146,528,414.37         103,409,357.71       42,844,425,782.36
      8   Makati                           47,509,523,569.33            3,990,429.16            346,937.48       47,513,860,935.97
      9   San Pablo City                   20,568,865,963.11           90,275,629.30          8,367,899.23       20,667,509,491.64
     10   Legaspi City                      2,137,470,680.96           39,846,499.08          7,497,442.77        2,184,814,622.81
     11   Iloilo City                       3,194,798,805.72              911,359.78         10,934,231.77        3,206,644,397.27
     12   Bacolod City                      2,618,307,530.04           40,145,548.89          2,103,193.29        2,660,556,272.22
     13   Cebu City                         5,853,655,534.34           18,478,679.02         21,501,098.95        5,893,635,312.31
     14   Tacloban City                     2,897,587,722.55           17,212,789.68         13,228,285.57        2,928,028,797.80
     15   Zamboanga City                    1,474,939,260.26           57,216,697.10          2,929,290.57        1,535,085,247.93
     16   Cagayan de Oro City               3,197,544,422.20           19,360,290.71          4,166,420.87        3,221,071,133.78
     17   Butuan City                       1,203,176,338.41            8,819,203.90          7,074,551.87        1,219,070,094.18
     18   Cotabato City                     2,002,521,241.52           12,973,906.28          9,724,606.54        2,025,219,754.34
     19   Davao City                        4,223,850,908.21         107,339,907.49          23,777,245.34        4,354,968,061.04
     20   National Office                 257,980,751,952.60           29,622,499.94            549,529.10     258,010,923,981.64

          TOTAL                        P 468,496,589,106.00          817,870,169.62         272,904,754.62     469,587,364,030.24
          PERCENT (%)
          DISTRIBUTION                                  99.77                   0.17                   0.06                  100.00

     Note: 1. Based on tentative BIR 12.09 report from Revenue Accounting Division (RAD) as of April 28, 2005.
           2. Voluntary Payments consist of collections from self-assessment, tax deposit/advance payment, income tax second
              installment, penalties and others, including payments made prior to issuance of preliminary/final assessments and special/
              onetime revenue enhancement programs [e.g. Centennial Taxpayer Recognition Program (CTRP)].

56                                                    2004 ANNUAL REPORT
                                   TABLE VII
                     BY TYPE OF TAX AND BY KIND OF FORM
                                CY 2004 & 2003

                                                                         Number of Returns     Increase/(Decrease)

 BIR FORM NUMBER              TYPE OF INCOME                            2004         2003      NUMBER PERCENT

GRAND TOTAL          GRAND TOTAL                                     10,359,469    9,887,669   471,800       4.77

  INCOME TAXES                                                         940,230       954,618   (14,388)     (1.51)
     1700            Purely Compensation Income                        219,809       292,239   (72,430)    (24.78)
     1701            Income from Self-Employed/ Professionals,
                          Estates and Trusts                           433,035       401,179    31,856        7.94
      1702           Corporations / Partnerships Annual Income         115,582       113,145      2,437       2.15
      1703           Non-Resident Citizen Income                         2,414         3,516    (1,102)    (31.34)
      1706           Individual Capital Gains Tax for Real Estate
                          Transactions                                 159,487       137,044    22,443       16.38
      1707           Capital Gains Tax on Stock Transaction              9,812         7,164     2,648       36.96
      1707-A         Annual Capital Gains Tax on Stock Transaction          91           331     (240)     (72.51)

   WITHHOLDING TAXES                                                  4,180,911    3,992,031   188,880       4.73
      1600       Monthly Remittance Return of Value-Added Tax
                     and Other Percentage Taxes Withheld               232,031       222,545     9,486       4.26
      1600-WP    Remittance Return of Percentage Tax on Winnings
                     and Prizes Withheld by Racetrack Operators          1,405         1,047       358      34.19
      1601-C     Monthly Remittance Return of Income Taxes
                     Withheld on Compensation                         2,087,009    2,019,585    67,424       3.34
      1601-E     Monthly Remittance Return of Creditable
                     Income Taxes Withheld (Expanded)                 1,677,547    1,572,081   105,466       6.71
      1601-F     Monthly Remittance Return of
                     Final Income Taxes Withheld                        83,813        77,371     6,442       8.33
      1602       Monthly Remittance Return of Final Income Taxes
                     Withheld on Interest Paid on Deposits and
                     Yield on Deposit Substitutes/Trusts/Etc.            16,095      21,082     (4,987)    (23.66)
      1603       Quarterly Remittance Return of Final Income Taxes
                     Withheld on Fringe Benefits                        14,047        15,856    (1,809)    (11.41)
      1606       Withholding Tax Remittance Return (For Onerous
                     Transfer of Real Property Other Than Capital
                     Asset - Including Taxable and Exempt                68,964       62,464     6,500      10.41

           BUREAU OF INTERNAL REVENUE                                                                                57
                         TABLE VII
                  CY 2004 & 2003 (continued)

                                                                       Number of Returns      Increase/(Decrease)
      BIR FORM
      NUMBER                TYPE OF INCOME                              2004        2003      Number       Percent

     VALUE - ADDED TAX                                                1,491,962   1,493,112     (1,150)     (0.08)
        2550M          Monthly Value-Added Tax Declaration              872,779     905,141    (32,362)     (3.58)
        2550Q          Quarterly Value-Added Tax Return                 619,183     587,971      31,212       5.31

     PERCENTAGE TAX                                                   2,266,808   2,105,650    161,158        7.65
        2551           Quarterly Percentage Tax Return                  699,993     781,106    (81,113)    (10.38)
        2552           Percentage Tax Return for Stock Transactions      41,886      37,106       4,780      12.88
        2551M          Monthly Percentage Tax Return                  1,524,929   1,287,438    237,491       18.45

     TRANSFER TAX                                                       50,767      48,465        2,302       4.75
        1800           Donor’s Tax Return                               20,394      20,546        (152)     (0.74)
        1801           Estate Tax Return                                30,373      27,919        2,454       8.79

     EXCISE TAX                                                         18,288      12,815        5,473      42.71
        2319A-E        Authority to Accept Payment for Excise Tax          818         833         (15)     (1.80)
        2200-A         Excise Tax Return for Alcohol Products              234          24          210       87.5
        2200-AN        Excise Tax Return for Automobiles and                10          11           (1)       (9)
        2200-M         Excise Tax Return for Mineral Products              601          169         432      256
        2200-P         Excise Tax Return for Petroleum Products              -            -           -         -
        2200-T         Excise Tax Return for Tobacco Products               22            -          22         -
        2200           Excise Tax Return                                16,603       11,778       4,825     40.97

     OTHER TAX                                                        1,410,503   1,280,978     129,525      10.11
        0605           Payment Form                                     840,238     732,719     107,519      14.67
        1558           VAT Registration Fee                               6,540      16,273      (9,733)   (59.81)
        2000           Documentary Stamp Tax Declaration                559,925     510,920      49,005       9.59
        0607           VAP Payment Form                                      53       2,977      (2,924)   (98.22)
        0608           Compromise Settlement Payment Form                   718         637           81     12.72
        0611           Voluntary Assessment and Abatement Program         3,029      17,452    (14,423)    (82.64)

        Rundate: February 17, 2005

58                                             2004 ANNUAL REPORT
                                                     Table VIII
                      BY TYPE OF RETURN
                                              CY 2004 & 2003

                                                            Number of Returns   Increase/(Decrease)
      NUMBER                 TYPE OF RETURN                2004        2003     Number       Percent
     GRAND TOTAL                                          770,840    810,079    (39,239)       (4.84)

I.   INDIVIDUAL                                           655,258     696,934   (41,676)       (5.98)

        1700     A. Pure Compensation Income              219,809     292,239   (72,430)      (24.78)
                    1. Taxable payable                    103,239     132,737   (29,498)      (22.22)
                    2. Taxable break-even                  39,579      69,826   (30,247)      (43.32)
                    3. Exempt                              20,708      21,745    (1,037)       (4.77)
                    4. Refundable Taxable                  51,329      58,878    (7,549)      (12.82)
                    5. Refundable Exempt                    4,954       9,053    (4,099)      (45.28)

        1701     B. Income from Self-employed /
                    Professionals, Estates & Trust        433,035     401,179     31,856        7.94
                    1. Taxable payable                    246,022     233,258     12,764        5.47
                    2. Taxable break-even                  19,420      19,627      (207)       (1.05)
                    3. Exempt                             133,089     112,702     20,387       18.09
                    4. Refundable Taxable                  26,159      29,418    (3,259)      (11.08)
                    5. Refundable Exempt                    8,345       6,174      2,171       35.16

        1703     C. Non - Resident Citizen Income           2,414       3,516    (1,102)     (31.34)
                    1. Taxable payable                      1,121       1,320      (199)     (15.08)
                    2. Taxable break-even                      77          97       (20)     (20.62)
                    3. Exempt                               1,211       2,091      (880)     (42.09)
                    4. Refundable Taxable                       1           6        (5)     (83.33)
                    5. Refundable Exempt                        4           2          2     100.00


        1702     Corporations / Partnership
                 Annual Income                            115,582     113,145      2,437        2.15
                   1. Taxable payable                      45,505      39,385      6,120       15.54
                   2. Taxable break-even                   17,765      23,586    (5,821)      (24.68)
                   3. Exempt                               43,031      42,032        999        2.38
                   4. Refundable Taxable                    7,164       6,029      1,135       18.83
                   5. Refundable Exempt                     2,117       2,113          4        0.19

Rundate: February 17, 2005

      BUREAU OF INTERNAL REVENUE                                                                        59
                   Guillermo L. Parayno, Jr.
                            Bureau of Internal Revenue

       Lilian B. Hefti               Jose Mario C. Buñag                Norma L. Lipana
    Deputy Commissioner                   Deputy Commissioner       OIC-Deputy Commissioner
       Operations Group             Legal and Inspection Group   Resource Management Group

  Lilia C. Guillermo               Kim S. Jacinto-Henares          Licerio C. Evangelista
     Deputy Commissioner                  Deputy Commissioner            Deputy Commissioner
Information Systems Group               Special Concerns Group      Criminal Prosecution Group
                                                                              Head Revenue
           Revenue Services                 Assistant Commissioner
                                                                           Executive Assistant

•         Policy and Planning Service       Marietta U. Lorenzo            Mustapha M. Gandarosa1
•         Enforcement Service               Celia C. King1                 Marissa O. Cabreros1
•         Assessment Service                Nora E. Tamayo                 Margaret Mary C. Lauron1
•         Collection Service                Virginia L. Trinidad           Marilou L. del Rosario1
•         Taxpayers Assistance Service      Lucita G. Rodriguez            Aida S. Simborio3
•         Legal Service                     Milagros V. Regalado
•         Inspection Service                Erlinda A. Simple              Domingo M. Alvarez
•         Human Resource Dev. Service       Leonor S. Villalon-Rogers      Carolina G. Pesayco
•         Financial and Administrative
               Service                      Norma L. Lipana2               Zenaida B. Chang
•         Information Systems Operations
               Service                      Alberto A. Pio de Roda         Victoria C. de Leon1
•         Information Planning
               And Quality Service          Victoria V. Santos             Anian R. Salazar
•         Information Systems
               Development Service          Ma. Rosario Charo E. Curiba3   Carolyn Ann C. Reyes
•         Large Taxpayer Service            Kim S. Jacinto-Henares2        Elvira R. Vera
                                                                           Corazon C. Pangcog1
1             2                    3
    OIC           OIC/Concurrent   Acting

                                                                            Assistant Regional
            Revenue Region                  Regional Director

RR No. 1 – Calasiao, Pangasinan               Jaime Q. Concepcion           Romeo P. Buan1
RR No. 2 – CAR, Baguio City                   Alfredo F. Balicanta, Jr.1
RR No. 3 – Tuguegarao, Cagayan                Norberto D. Vitug1            Thelma S. Milabao1
RR No. 4 – San Fernando, Pampanga             Jose N. Tan                   Perfecto L. Aranas1
RR No. 5 – Valenzuela City                    Rene Q. Aguas                 Eduardo T. Bajador1
RR No. 6 – Manila                             Alfredo V. Misajon            Zenaida G. Garcia1
RR No. 7 – Quezon City                        Nestor S. Valeroso            Marina C. De Guzman1
RR No. 8 – Makati City                        Anselmo G. Adriano2           Ma. Nieva A. Guerrero1
RR No. 9 – San Pablo City                     Merlinda L. Ordoyo2           Glen A. Geraldino1
RR No. 10 – Legaspi City                      Estrella V. Martinez          Edgar P. Claveria
RR No. 11 – Iloilo City                       Sonia L. Flores               Rodita B. Galanto1
RR No. 12 – Bacolod City                      Lirio A. Cabsaba              Diosdado R. Mendoza1
RR No. 13 – Cebu City                         Jaime B. Santiago             Araceli L. Francisco
RR No. 14 – Tacloban City                     Alert B. Alocilja1            Tomas C. Rosales1
RR No. 15 – Zamboanga City                    Perla A. Bala2                Nasser A. Tanggor1
RR No. 16 – Cagayan de Oro City               Leonardo Q. Sacamos           Alberto S. Olasiman1
RR No. 17 – Butuan City                       Tamanatao S. Amerol           Nuzar N. Balatero1
RR No. 18 – Cotabato City                     Mama B. Marzoc                Mamapok G. Diro1
RR No. 19 – Davao City                        Marcelinda O. Yap             Esmeralda M. Tabule
    OIC            2

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