AI tech and the BIR

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In this AI era, I am sure a number of people have wondered if we can use AI-empowered robots instead of corrupt examiners at the BIR to improve efficiency and honesty.

While no country has gone that far yet, many tax authorities around the world are already using AI to make tax collection more efficient, more data-driven and better at detecting fraud and non-compliance.

The US Internal Revenue Service, UK’s HM Revenue and Customs and the Australian Taxation Office use AI algorithms to analyze submitted tax returns and flag high-risk cases for human audit. The IRS uses machine learning to identify tax evasion and refine case selection for audits.

The Spanish Tax Agency is using AI-driven virtual assistants (chatbots) which can answer frequently asked questions about tax filing deadlines, general understanding of taxes, VAT and e-invoicing, etc.

That’s what tax expert Mon Abrea is saying. The BIR should move beyond audit suspension and adopt AI-driven, risk-based investigation and lifestyle checks. He points out that while suspending audits is a necessary first step, it is not reform.

“Modern tax administrations no longer rely on random or manual audits. Instead, they use risk-based systems powered by AI, data analytics and inter-agency data sharing. The OECD, World Bank and IMF consistently recommend this approach to improve compliance while reducing harassment of compliant taxpayers.”

What we need, Abrea said, is a system where the BIR shares data with the SEC, LGUs, AMLC, LRA, Bureau of Customs and with all government departments sharing their list of contractors.

“Public officials, especially those from political dynasties, undergo regular lifestyle checks. Citizens can participate through a secure, anonymous public portal to submit information, documents or photos related to unexplained wealth.

“Countries that empowered citizens and used data — not discretion — saw corruption cases rise, revenues increase and investor confidence strengthen.”

Abrea cites Singapore (IRAS) as an example of a country that has demonstrated that automation, independence and professionalism are key to effective tax collection.

The Philippines, he said, must either fully integrate and automate the entire tax system or consider transforming the BIR into a more independent, technology-driven revenue authority, insulated from political interference.

Then Abrea talks of something I have always wondered about since I paid my first income tax in 1969. I was barely minimum wage as a cub reporter at ABS-CBN. Yet, I remember visiting the BIR office to explain my return.

Years later, I was advised to file for tax amnesty regardless of whether I have filed an accurate return or not. An amnesty protects a taxpayer from audit harassment. True enough I got an audit notice and I only had to tell them I filed a tax amnesty.

That’s such a waste of time for a small taxpayer on fixed income. You would have thought they had taipans to deal with to produce more collections. Abrea rightly calls for pro-people, pro-MSME tax reforms while collecting more from the rich and powerful.

Of course, collecting from the rich and powerful is easier said than done. They have tax lawyers who are well connected with BIR officials and they have good accountants who know all the tax shields and barely legal tax avoidance strategies.

A fair tax system, for Abrea, must relieve the small guys just trying to comply and collect from those who can afford to pay but choose not to. That sounds reasonable but that’s not what we have.

From experience and anecdotal evidence, the BIR makes it difficult for the small taxpayer trying to comply. A student trying to get a tax account number was recently humiliated and given the runaround in a BIR office.

Abrea points out that MSMEs account for over 99 percent of businesses, yet they suffer the highest compliance costs. That’s one reason why people aren’t enticed to be entrepreneurs unless they have no intention of complying to tax rules anyway. Underground economy na lang.

Abrea suggests that there should be no mandatory books of accounts or audited financial statements for MSMEs with annual gross sales not exceeding P100 million.

Abrea reports that there was improved compliance and reduced corruption opportunities in Australia, New Zealand and the UK after simplification of the tax filing process.

We must also remember that computerization is not a “set it and forget” solution. AI augments human work — honest tax professionals are still needed to interpret and act on AI outputs, especially for complex cases.

AI must be supervised, transparent and supported by legal safeguards to avoid unfair or incorrect outcomes. But it can protect most small taxpayers from corruption and abuse.

Sen. Win Gatchalian has filed the GINHAWA Bill to deliver permanent and targeted relief by raising the income tax exemption to P400,000. This will help working Filipinos without undermining fiscal sustainability.

This should apply to compensation income earners whose taxes are withheld at source, ensuring automatic compliance, zero leakage and direct relief to workers who already shoulder the bulk of income tax collections.

Abrea is also suggesting the implementation of the 15 percent Global Minimum Tax. Over 140 countries have committed to the OECD’s 15 percent GMT to make sure large multinational companies pay their fair share.

Failure to implement GMT means the taxes are collected by other countries instead of the Philippines. That’s lost revenues that could fund infrastructure, health care and education. It is not anti-investment — it is pro-fair competition and fiscal sovereignty.

As Abrea puts it, if the Philippines is serious about fighting corruption, protecting honest taxpayers and attracting responsible investors, then the message must be unmistakable: The poor will no longer carry the burden; those who complain about abuses and corruption will be protected; and the corrupt — no matter how powerful — will be prosecuted and permanently disqualified from public office.

We can dream, can’t we?

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco