In the Philippines, an aggressive tax collector takes aim at the famous, and gets results

Kim Henares official photo (www.bir.gov)

MANILA, Philippines – The petite sharp-shooting bureaucrat in charge of getting Filipinos to pay their fair share of taxes couldn’t have chosen a higher profile target: Manny Pacquiao, the world champion boxer and hero to millions.

The pursuit of the boxer and congressman made a striking statement that no one was above the law, but it wasn’t universally popular. One of Pacquiao’s fellow congressmen proposed legislation to give him a lifetime tax exemption because his sporting feats had inspired the country.

Kim Henares, the chief tax collector, has remained steadfast in her campaign against the boxer, who was listed as the country’s wealthiest member of Congress last year.

“I want everyone to become rich, but they should pay the right taxes. They should not become rich at the expense of government,” she said.

The Philippine economy grew 7.2 per cent last year, the second fastest in Asia after China, but government revenue has fallen short of expectations in a country where decades of corrupt and inefficient government allowed a culture of tax evasion to flourish.

Now a reform-minded president wants to rake in more taxes to pay for increased spending on much needed infrastructure and public services such as health and education.

The 53-year-old straight-talking Commissioner of the Bureau of Internal Revenue has shifted her agency into “law enforcement mode” with an aggressive anti-tax evasion campaign to catch cheats and raise collections.

Henares is a lawyer and accountant whose hobbies include weekly trips to the firing range where she shoots off automatic pistols and assault rifles. Shooting has become one of her favourite pastimes since she was appointed in July 2010 by President Benigno Aquino III, a gun aficionado who introduced her to the sport.

She has several armed presidential guards assigned by Aquino for her security but also wanted to be confident in handling a gun if a situation ever required it.

“I shoot combat, which is fast,” she said at a gun range recently where she fired 300 rounds from her SVI Infinity .40 calibre pistol. “I have very good teachers, including the president.”

While improving her marksmanship she also expanded the targets of her non-lethal campaign. She has since charged scores of individuals and companies in more than 210 tax evasion cases to collect 50 billion pesos ($1.1 billion), a significant addition to government coffers that last year received 1.253 trillion pesos ($28 billion) in taxes.

A World Bank report last year praised the government’s “strong initial gains” in its tax effort. A senior bank economist, however, said the improvements needed to become entrenched to translate into lasting gains for the country’s poor.

The government’s ambitions for spending on infrastructure and public services such as health and education could be largely met by increased tax revenue, said senior bank economist Karl Kendrick Chua.

The country’s tax collection rate is currently about 14 per cent of GDP, which is lower than its more developed neighbours Thailand and Malaysia, and down from 18 per cent in 1997. The government wants to raise it to between 16 per cent and 18 per cent by 2016.

Henares admits to an unorthodox approach to finding targets for tax evasion investigations: she scours the country’s newspapers and magazines for tales of the rich and famous.

“My deputy commissioner says I am such a gossip,” she said. “You have to be in tune with everything that’s happening around you so that you’re aware who should logically be paying a high tax.”

Henares’ agency also publishes newspaper advertisements listing companies allegedly cheating on tax as part of a name-and-shame campaign. She says there are two things that make Filipinos comply with rules _ fear and shame.

A recent campaign targeted some self-employed professionals that the government alleges are not paying their way. They portrayed an online trader who pays no tax riding on the shoulders of a construction foreman. Another featured a school teacher carrying a doctor who cheats on her tax.

“`I think everybody agrees that Kim has really brought a lot of fear into the tax payers’ consciousness,” said former finance official and clean governance activist Milwida Guevara. “Tax payers now know that there is a possibility that the bureau of internal revenue will go after them.”

Henares recently filed a case demanding 2.72 billion pesos ($60 million) from a gold trader who allegedly didn’t pay taxes from 2005 to 2009. She has also filed charges against a former congressman and son of Aquino’s predecessor, Gloria Macapagal Arroyo, and impeached Supreme Court Chief Justice Renato Corona.

But her most controversial target has been Pacquiao, the well-loved Bible-quoting boxer.

When Pacquiao publicly disclosed in November that Henares froze his bank accounts and that he had no money to purchase relief supplies for victims of Typhoon Haiyan, many of his fans and some fellow congressmen expressed sympathy for him and criticized Henares.

Though he is not yet charged with any criminal tax offence, the Bureau of Internal Revenue has demanded that Pacquiao pay 2.2 billion pesos ($49.2 million), including interest and surcharges, for unpaid taxes in 2008-2009.

Pacquiao has disputed the tax assessment at the Court of Tax Appeals where he also sought access to his bank accounts.

Henares said the amounts were based on media reports of Pacquiao’s reported earnings in 2008 and 2009. Forbes Magazine listed Pacquiao as the world’s sixth highest-paid athlete in 2009. He was in the 14th spot in 2013, with earnings of $34 million.

“It’s for Manny Pacquiao to prove to us that those reports are wrong,” she said.