REFLECTING its ongoing efforts to root out corruption, the Philippines is now eligible for bigger grants from a US government corporation that promotes civil liberties, public health expenditure, girls’ primary education, business start ups and land rights.
“The Philippines was re-selected as a compact-eligible country during the meeting of the Millennium Challenge Corp. [MCC] Board in December, 2008,” says Dante Canlas, executive director of the Millennium Challenge Account Philippine Compact Program Office. “Compact signing is, however, conditional on the Philippines making progress on a Policy Improvement Process [PIP], particularly in fighting corruption.”
Since it became eligible for so-called “Compact” projects last year, the Philippines embarked on consultative meetings that resulted in several project proposals submitted for possible grants from the MCC.
The MCC is a US government corporation designed to work with developing countries in the belief that aid is most effective when it reinforces sound political, economic and social policies that promote poverty reduction through economic growth.
“The proposals are now undergoing peer review in Washington,” Canlas says.
Since early 2007, the MCC has funded the Philippines’ Threshold Program aimed at enhancing anti-corruption efforts by strengthening the Office of the Ombudsman, improving revenue administration and increasing enforcement capacity within the Department of Finance.
The Philippines became eligible for a $21-million MCC Threshold Program in November 2006. The program is used to assist a country to become eligible for a full “Compact” program that substantially increases grants depending on project costs.
The Philippines became available for so-called Compact projects in March 2008 as the MCC observed the country’s consistent performance on eligibility criteria and its effective implementation of the MCC-funded Threshold Program focused on helping curb corruption through improved tax and customs administration and strengthening of their Ombudsman’s office.
Eligibility for “Compact” projects does not guarantee funding. The Philippines, like all countries eligible for a compact, must maintain its performance on the selection criteria and embark on a consultative process to develop proposals that addresses the country’s barriers to poverty reduction and economic growth.
The consultation process included the public, nongovernmental organizations and the government and private sector.
Measured by 17 different policy indicators, a country becomes eligible for an MCC “Compact” program when it has consistently upheld civil liberties, political rights, voice and accountability, government effectiveness, rule of law, control of corruption, health immunization rates, public health expenditure, girls’ primary education completion rate, public expenditure on primary education, business start up, inflation, trade policy, regulatory quality, fiscal policy, natural resource management and land rights and access.
The indicators are based on data from local, US and international sources such as the Heritage Foundation, World Bank, International Monetary Fund, World Health Organization and the United Nations Educational, Scientific and Cultural Organization.
Since the Philippines became eligible for a “Compact” project last year, it has submitted several “Compact” project proposals that are now undergoing peer review in Washington, D.C.
The proposed “Compact” projects include Secondary National Roads Development ($191 million); Empowerment and Development Project for Poor Communities ($140 million); Sustainable Upland Watershed Management and Productivity Enhancement ($43 million); and Integrated Revenue Information System for Sustained Fiscal Governance ($148 million).
One proposal ($ 191 million) involves the Department of Public Works and Highways aims to improve six priority secondary roads totaling 309.5 kilometers. Another ($140 million) involves the Department of Social Welfare and Development (DSWD) to scale-up a World Bank project that assists local governments to increase access to basic education, health and nutrition, shelter, potable water, sanitation, electricity and other needs.
The DSWD also proposed a poverty reduction project that provides cash grants to extremely poor households to allow 172,488 households to meet certain human development goals such as regular school attendance and availing of recommended child and maternal health care services.
The Department of Agriculture wants to improve 170 small water-impounding projects (mostly, dams) in upland areas in 41 provinces. Impounded rainwater will irrigate 13,000 hectares while 500 hectares will be developed into a water reservoir for inland fishery and 3,400 hectares of watershed for agroforestry.
In 2007, the Department of Budget and Management allotted P153.11 million to the Bureau of Internal Revenue (BIR) and the Department of Finance (DOF) anti-corruption programs, while another P105.49 went to the Bureau of Customs as part of the Philippine government’s share to the Washington grant under the MCA Threshold Program Assistance (TPA).
A typical TPA ended in March at the Bureau of Customs Run After the Smugglers (RATS) program. Since 2005, RATS initiated detection, investigation and prosecution of smugglers and trade law violators. The aim is to streamline trade enforcement and increase revenue collection.
The assistance included training of lawyers, investigators and prosecutors of the Department of Justice Task Force on Anti-Smuggling. Personnel were trained in the management of air- and seaport surveillance equipment acquired from the program. An evidence storage facility was set up.
At a cost of $630,000 (P28.3 million), the project included hardware, software, IT-related training, and third-party consulting services and a data/statistical analysis system. The information data warehouse was established to monitor revenues, profile imports and importers, analyze trends and target potential smugglers.
With 12 full time attorneys, and 100 more to be deployed nationwide, RATS profile, evaluate and litigate trade law violators and fraudulent importers and brokers.
The turnover was held on March 5 to mark the culmination of technical assistance to the Revenue Integrity Protection Service (RIPS) in the Department of Finance during which 132 corruption cases were filed with the Office of the Ombudsman, exceeding targets by 12 percent.
RIPS investigates allegations of corruption in the Department of Finance and unjustified accumulation of wealth disproportionate to earning capacity of the same officials and employees.
The TPA was also instrumental in the formulation of the Customs and Tariff Modernization Act of 2008 that harmonizes and updates customs laws, rules and regulations.
On the darker side, Information Technology gives tax evaders new avenues and tools to engage in lucrative transactions and then hide their money from tax authorities. Or launder crime money in ways that make it legitimate.
Also last March, a seminar on e-commerce was held for revenue and justice officials. An American justice attaché was among those who discussed electronic evidence and money laundering, rules of court governing use and admissibility of electronic evidence and the techniques used in preparing digital documents.
Early this year, 79 officers from the Office of the Ombudsman attended training on corruption prevention patterned after the Hong Kong University Postgraduate Certificate Course in Corruption Studies.
The TPA also supports the Run After Tax Evaders (RATE) Program created by the Department of Finance and the Bureau of Internal Revenue in 2005.
The National Tax Research Center estimates that from 2001 to 2006, over P179 billion in income taxes were lost from tax evasion by fixed-income earners, professionals and self-employed individuals.
It promotes voluntary tax compliance and generates deterrence after violators are caught and punished. In the first of a series of measures, the BIR designated specific investigators among a team of examiners to handle RATE cases.
Among the RATE programs assisted is to inform taxpayers that the BIR has the capacity and the will to make tax evasion a high-risk, low-reward activity.
This includes computerizing the gathering, storage and retrieval of data on taxpayers, from the district level up.
The RATE program computerized 71 tax districts; only 44 districts, most of them in Metro Manila and Cebu, were previously computerized. The program provided the computers, servers, network cabling and data storage facilities.
The data can be mined, analyzed and retrieved at a much faster rate and in a more efficient manner than manual operations. The comprehensive database captures all tax transactions and enables the bureau to countercheck within, between, and among data sets for indications of tax evasion.