IMF, MCC to help reform Philippine tax system

The International Monetary Fund (IMF) will send a resident advisor to the Bureau of Internal Revenue (BIR) and other short-term technical assistance missions to the Philippines in support of capacity-building for reforms and upgrades in tax administration.

The multilateral lender said Wednesday it has entered a partnership agreement with the US-led Millennium Challenge Corporation (MCC) to help the BIR improve its revenue administration policies and procedures.

In the first agreement of such kind between the US and IMF, MCC will contribute $4.6 million to pay for a resident advisor with the BIR and a significant number of short-term technical assistance missions by IMF experts that will help resolve a variety of technical tax administration issues.

“Today’s agreement is a milestone. This is the first technical assistance agreement between the IMF and the US Government. The agreement will serve as a solid foundation for success in reforming the Philippines Bureau of Internal Revenue, as well as a solid foundation for productive collaboration between the IMF and MCC,” MCC vice president Patrick Fine said in a statement from Washington released Wednesday in Manila.

As part of the agreement, an IMF assessment mission will go to the Philippines in November and the resident advisor may be in place and engaging the BIR before 2010 ends.

By early 2012, the IMF will give MCC an annual report on the BIR’s commitment toward reform.

The money for the BIR capacity-building will from the MCC’s $434 million poverty reduction compact with the Philippines that include a $54.3 million investment in automating and streamlining business processes at the BIR.

The 40-month project is designed to bolster of revenue collection and reduce opportunities for corruption, according to the IMF.

IMF deputy managing Director Murilo Portugal said the agreement sets the stage for a strong partnership between the IMF and the US government.

“We warmly welcome the United States as a donor to the Fund’s technical assistance program. We are looking forward to working together for the benefit of the Philippines,” Portugal said after the signing ceremony in Washington.

MCC is a US government agency working with developing countries based on the principle that aid is most effective when it reinforces sound political, economic, and social policies that promote poverty reduction through economic growth.

President Benigno Aquino III signed the $434 million MCC grant for poverty alleviation when he visited the US last month.

Aside from the $54.3 million in investments, the project also involves a $120-million grant to expand the government’s Kalahi-CIDSS project, a community-based, rural development program.

KALAHI-CIDDS or Kapit-Bisig Laban sa Kahirapan-Comprehensive Integrated Delivery of Basic Services is a poverty reduction scheme implemented by the Department of Social Welfare and Development.

The grant will also partly finance the construction and repair of 220 kilometers of the $214.4-million Samar Road. — VS, GMANews.TV