What is BIR? A Comprehensive Overview to the Bureau of Internal Revenue

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The Bureau of Internal Revenue (BIR) in the Philippines is a key government agency tasked with collecting over half of the government’s total revenues. 

It operates under the Department of Finance and is headed by Commissioner Romeo Lumagui, Jr., who assumed office on November 15, 2022. 

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Bureau of Internal Revenue History:

BIR
What is BIR? A Comprehensive Overview to the Bureau of Internal Revenue 3

After the American rule in the Philippines from 1899 to 1901, the country started setting up its own government. William Howard Taft, who was the Governor-General, played a role in creating the first civil government in 1902. 

The Bureau of Internal Revenue (BIR) came into being under the second civil governor, Luke E. Wright, through a law called Reorganization Act No. 1189 on July 2, 1904.

When the Bureau of Internal Revenue began, it only had 69 people working for it. John S. Ford was the first person in charge (Collector of Internal Revenue) from 1904 to 1907. 

Other Americans like Ellis Cromwell, William T. Nolting, and James J. Rafferty followed him. After Rafferty, Filipinos took on the role of BIR Collectors: Wenceslao Trinidad (1918–1922), Juan Posadas Jr. (1922–1934), and Alfredo L. Yatco (1934–1938).

Filipinos started having a more significant role in the BIR under Ariel Memoracion, who served from 1939 to 1941 and later from 1946 to 1950. 

During World War II, Bibiano L. Meer was in charge from 1942 to 1944, and after the Philippines got liberated, Jose Leido Sr. took over.

Other leaders like Saturnino David (1950–1954) and Antonio Araneta (1954–1955) followed. In 1957, the leader’s title changed from collector to commissioner.

In recent times, Lilian Hefti led the Bureau of Internal Revenue starting in September 2007 but resigned in October 2008 due to health reasons. Sixto Esquivias took her place on October 20, 2008.

Today, the Bureau of Internal Revenue has grown a lot, having more than 75 forms and different tax categories for professionals and businesses. 

The Bureau of Internal Revenue journey shows how it started with a small group and changed over the years to adapt to the needs of the Philippines.

Spanish Era: 17th and 18th Centuries

During the 17th and 18th centuries, under Spanish rule in the Philippines, the Contador de’ Resultas held a pivotal role as the Chief Royal Accountant. 

This position closely resembled the functions of the modern Commissioner of Internal Revenue. Serving as the Chief Arbitrator, the Contador de’ Resultas had the authority to make final decisions on financial matters, except when overruled by the Council of Indies.

In this period, taxes imposed on the inhabitants were diverse, encompassing a tribute or head tax of one gold maiz annually. 

Additionally, taxes were levied on the value of jewelries and gold trinkets, along with indirect taxes on various commodities such as tobacco, wine, cockpits, burlas, and powder.

The financial struggles of the Philippines during this time compelled the Spanish treasury to provide an annual subsidy of ₱250,000.00 from 1521 to 1821. 

This financial support was necessary due to the country’s poor economic condition, primarily stemming from an inadequate revenue collection system.

American Era: 1898–1941

Early American Rule (1898–1901)

In the initial years of American governance from 1898 to 1901, the Philippines was under the administration of American military governors. 

The transition to civilian governance occurred in 1902 when the first civil government, led by William Howard Taft, was established.

However, the creation of the Bureau of Internal Revenue (BIR) awaited the term of the second civil governor, Luke E. Wright. 

The crucial Reorganization Act No. 1189, passed on July 2, 1904, formally brought the Bureau of Internal Revenue into existence. On August 1, 1904, the bureau became operational under the oversight of Secretary of Finance Henry Ide, the architect of the Internal Revenue Law of 1904. 

John S. Hord assumed the role of the first Collector (Commissioner), leading an organization comprising 69 employees, including a Vice-Collector, Chief Clerk, Law Clerk, Records Clerk, and three Division Chiefs.

Evolution and Reorganization (1904–1938)

Successive American collectors played pivotal roles in shaping the BIR’s structure. After Hord, Ellis Cromwell (1909–1912), William T. Holting (1912–1914), and James J. Rafferty (1914–1918) held the position, each appointed by the Governor-General with approval from the Philippine Commission and the U.S. president. 

Under Collector Holting in 1913, the Bureau of Internal Revenue underwent its first reorganization, establishing eight divisions, including Accounting, Cash, Clerical, Inspection, Law, Real Estate, License, and Records. 

The functions of Real Estate and License Divisions were confined to revenue accruing to the City of Manila.

Filipinization and Continued Evolution (1918–1938)

In adherence to President William McKinley’s Filipinization policy, Filipino Collectors were appointed. 

The first three BIR Collectors were Wenceslao Trinidad (1918–1922), Juan Posadas Jr. (1922–1934), and Alfredo Yatao (1934–1938). 

A significant organizational shift occurred in May 1921 when Act No. 299 led to the abolition of Real Estate, License, and Cash Divisions, transferring their functions to the City of Manila. 

This left the Bureau with five divisions: Administrative, Law, Accounting, Income Tax, and Inspection. 

The Examiner’s Division and the Secret Service Section were subsequently established. The latter, handling detection and surveillance, operated until January 1, 1951.

Further Reforms and Regulation (1939–1941)

Minor changes, including the creation of the Miscellaneous Tax Division in 1939, characterized the Bureau’s organizational landscape until 1941. 

In 1937, Regulation No. 95 from the Secretary of Finance reorganized Provincial Inspection Districts, maintaining Internal Revenue Offices in each province supervised by a Provincial Agent.

Japanese Era: 1942–1945

World War II and Japanese Occupation

During World War II, under Japanese rule from 1942 to 1945, the Bureau underwent significant changes. It was merged with the Customs Office and placed under the leadership of a Director of Customs and Internal Revenue.

Post-war Era: 1946 Onwards

Independence and Re-establishment (1946)

On July 4, 1946, the Philippines gained independence from the United States, leading to the re-establishment of the Bureau as a separate entity. 

A reorganization on October 1, 1947, through Executive Order No. 94, included merging the Accounting Unit and the Revenue Accounts and Statistical Division, consolidating records in the Records Section, and centralizing all legal work in the Law Division.

Further Reorganizations (1951–1957)

The second major reorganization occurred on January 1, 1951, with the creation of three new departments: Legal, Assessment, and Collection. 

The Withholding Tax Unit was established, implementing the withholding tax system under Republic Act (RA) 690. 

The third major reorganization took place on March 1, 1954, with the creation of offices like the Specific Tax Division, Litigation Section, Processing Section, and the Office of the City Revenue Examiner.

Regionalization and Expansion (1955–1957)

Regional Offices and Decentralization

To decentralize operations, the Bureau created its first two Regional Offices in Cebu and Davao on July 20, 1955. Regional Directors headed each office, overseeing five branches: Tax Audit, Collection, Investigation, Legal, and Administrative. 

By 1957, the Bureau expanded to ten Regional Offices, aligning with the government’s regionalization scheme.

Change in Leadership and Initiatives (1957–1959)

In January 1957, the title of the head changed from Collector to Commissioner, with Jose Aranas being the last Collector and the first Commissioner. 

Noteworthy initiatives in 1958 included the establishment of the Tax Census Division for each Regional Office, consolidating financial information nationwide. 

In 1959, RA No. 233, known as the Rewards Law, aimed to enforce tax payments and discourage evasion by rewarding informers.

1964 and Marcos Administration

Administrative Changes and Division

In 1964, the Philippines underwent a redivision into 15 regions and 72 inspection districts.

The Marcos administration, starting in 1965 under Commissioner Misael Vera, brought notable programs like the “Blue Master Program” and the “Voluntary Tax Compliance Program.”

These initiatives aimed to address abuses and encourage accurate reporting of income.

Further Subdivision and Modernization (1970–1980)

Under Commissioner Vera, the country was subdivided into 20 Regional Offices and 90 Revenue District Offices. 

The issuance of Tax Account Numbers (TAN) in 1970 facilitated taxpayer identification, while tax payments through banks and package audit investigations further enhanced collection performance. 

The proclamation of Martial Law in 1972 marked a period of organizational changes within the Bureau.

Office Relocation and Code Update (1976–1980)

In 1976, under Commissioner Efren Plana, the Bureau’s National Office moved to a dedicated building in Quezon City. President Ferdinand Marcos promulgated the National Internal Revenue Code of 1977 in the same year. 

The Bureau underwent further reorganization on August 1, 1980, under Commissioner Ruben Ancheta, creating new offices and relocating organizational units for improved responsiveness to taxpayers.

Aquino Administration: 1986–1992

Post-People Power Revolution Changes

After the People Power Revolution in February 1986, the Bureau of Internal Revenue (BIR) worked on making tax collection more efficient and honest through “Operation: Walang Lagay.”

Reorganization and Tax Rules (1987–1988)

Under Commissioner Bienvenido Tan Jr., the Bureau of Internal Revenue underwent changes on January 30, 1987, making two main groups: the Assessment and Collection Group and the Legal and Internal Administration Group. In 1988, a new tax called the value-added tax (VAT) was introduced.

Tax Program (1989)

Commissioner Jose Ong, starting in 1989, introduced the “Tax Administration Program” to improve tax collection and simplify the process. This included using the Taxpayer Identification Number (TIN) and a new payment system.

Ramos Administration: 1992–1998

Transforming the System

Commissioner Liwayway Vinzons-Chato, the first female Commissioner, started the Action-Centered Transformation Program (ACTS) in 1993. ACTS aimed to align the Bureau of Internal Revenue with its vision and mission.

Modernizing Tax Systems (1994)

A five-year Tax Computerization Project (TCP) began in 1994. It aimed to modernize the BIR’s tax systems with new technology.

More Changes (1997)

In 1997, more changes came with Executive Order No. 430, streamlining the Bureau of Internal Revenue further and creating new groups and service units.

Estrada Administration: 1998–2001

Helping Businesses Recover

Under President Joseph Estrada’s administration, Commissioner Beethoven Rualo introduced the Economic Recovery Assistance Payment (ERAP) Program in 1998. 

This helped businesses by providing immunity from audits to those who paid more taxes.

Educating Taxpayers (1999)

In 1999, efforts like the “Humingi ng Resibo, Manalo ng Libo-Libo” promo encouraged consumers to ask for receipts. The Large Taxpayers Monitoring System began to closely watch large taxpayers.

New Leadership

Dakila Fonacier became Commissioner in the early 2000s, focusing on making tax compliance easier and using more technology.

Arroyo Administration: 2001–2010

Big Changes

After EDSA II in 2001, Commissioner René G. Bañez aimed to transform the Bureau of Internal Revenue into an agency focused on taxpayers. Changes included simplifying the tax system and using more technology.

Voluntary Assessment and Technology (2002)

Under Commissioner Guillermo Parayno Jr., the BIR introduced the Voluntary Assessment and Abatement Program (VAAP) in 2002. They also started using electronic systems for filing and paying taxes.

Computerized Systems for Everyone

The Bureau of Internal Revenue extended the use of the Integrated Tax System to more offices across the country.

Duterte Administration: 2016–Present

New Tax Law

Under President Rodrigo Duterte, a new tax law called the Tax Reform for Inclusion and Acceleration Act (TRAIN) was signed in 2017. 

It lowered personal income taxes but increased taxes on certain goods to get more money for important projects.

Functions of the Bureau of Internal Revenue (BIR)

The Bureau of Internal Revenue (BIR) is entrusted with essential powers and duties outlined in its mandate:

  1. Reduction and Collection of Internal Revenue:

The Bureau of Internal Revenue is responsible for the efficient reduction and collection of all internal revenue taxes, fees, and charges.

  1. Enforcement of Forfeitures, Penalties, and Fines:

The bureau is tasked with enforcing all forfeitures, penalties, and fines related to internal revenue matters. 

This includes the execution of judgments in cases decided in its favor by the Court of Tax Appeals and ordinary courts.

  1. Administration of Supervisory and Police Powers:

The BIR holds the authority to administer supervisory and police powers as granted by the National Internal Revenue Code and special laws.

  1. Execution of Court Decisions:

It has the responsibility to execute judgments handed down in its favor by both the Court of Tax Appeals and ordinary courts, ensuring compliance with legal decisions.

These functions collectively empower the BIR to uphold tax laws, ensure revenue compliance, and maintain the integrity of the taxation system in accordance with national legislation.

Contact Details:

The Philippine Go does not collect fees and is not a hiring agency, nor is it related to any hiring agency for employment abroad. 

All information contained here is solely for informational purposes and rightfully belongs to its rightful owner. 

Attached in the last section of the content are references for further verification, if needed. Read more

Feel free to reach out through these channels for assistance, information, or clarification on tax-related matters. 

Conclusion:

Looking back at the story of the Bureau of Internal Revenue (BIR) in the Philippines, it’s like a journey from a small group in 1904 to a big government team today. The BIR has changed a lot over time to meet the needs of the Philippines.

They’ve been working on making tax collection better and more honest. After the People Power Revolution in 1986, they started “Operation: Walang Lagay” to improve tax collection.

Different leaders brought in changes. For instance, during President Joseph Estrada’s time in 1998, they introduced the Economic Recovery Assistance Payment (ERAP) Program to help businesses. 

They also ran campaigns like “Humingi ng Resibo, Manalo ng Libo-Libo” in 1999 to encourage people to ask for receipts.

In recent times, the BIR focused on making tax compliance easier and using more technology. Under President Rodrigo Duterte, they signed a new tax law in 2017 called the Tax Reform for Inclusion and Acceleration Act (TRAIN). 

This law lowered personal income taxes but increased taxes on certain goods to get more money for important projects.

The BIR’s main job is to collect taxes and make sure people follow the rules. They’ve made many changes, including creating regional offices and using new technology for tax systems.

Disclaimer:

The Philippine Go does not collect fees and is not a hiring agency, nor is it related to any hiring agency for employment abroad. 

All information contained here is solely for informational purposes and rightfully belongs to its rightful owner. 

Attached in the last section of the content are references for further verification, if needed. Read more

Reference:

  1. Wikipedia: Bureau of Internal Revenue. (n.d.). History. Retrieved 2023, from [https://en.wikipedia.org/wiki/Bureau_of_Internal_Revenue]
  2. Official Website: Bureau of Internal Revenue. (n.d.). BIR Trunkline. Retrieved 2023, from [https://www.bir.gov.ph/index.php/contact-us/bir-trunkline.html]