Regional Allocation of the BIR Collection Goal for CY 1997

January 21, 1997 REVENUE MEMORANDUM ORDER NO. 02-97 SUBJECT : Regional Allocation of the BIR Collection Goal for CY 1997 TO : All Regional Directors and Other Officers Concerned I. CY 1997 Overall Collection Goal The revenue target of the Bureau for CY 1997 as of December 6, 1996 is P333,175 M broken down into: P288,471 M for existing measures, P19,410 M for approved measures and P25,294 M for measures in process (Table 1). The revenue target includes expected collection of P 25,667 M for Comprehensive Tax Reform Package (CTRP) less P373 M for Net Operating Loss of Companies (NOLCO). pred II. Basic Data Used A. Excise Tax 1. Excise Tax Incremental Revenue Report from Regulatory Operations Monitoring Division (ROMD) 2. CY 1995 Cumulative Reports of Collection by Type of Tax by RDO from Revenue Accounting Division (RAD) 3. Percent Share of Revenue Regions by Products Covered by Excise Tax Annex A 4. Regional Goal Allocation by Products Covered by Excise Tax, CY 1997 Annex B Annex A shows the percent share of revenue regions by products based on data from ROMD and RAD. The basis will be used to allocate the revenue impact of the CTRP implementation as presented in Annex B. B. All Other Taxes 1. CY 1995 Final Collection Report from RAD 2. Tax Payments of Large Taxpayers from LTD, Jan. Feb. 1995 3. Adjusted Regional Collection for CY 1995 Annex C Annex C shows the adjusted regional collection for CY 1995 using data from RAD and LTD. The adjustment took into account the proper crediting of tax payments of Large Taxpayers to the RRs/RDOs where their head offices are located. C. Monthly Collections for CY 1996 Annex D Annex D shows the CY 1996 actual monthly collections for the months of January to July as reported in the BIR Form No. 1209 prepared by RAD and the projected collections for the succeeding months. cdpr III. Assumptions Used A. For estimating CY 1996 Collections To determine the CY 1996 collections given the January to July 1996 collections in II (B), it is assumed that the ratio of the January July 1995 to CY 1995 is equal to the ratio of January July 1996 to CY 1996. B. For Allocating Certain Taxes 1. Excise Tax a. For Petroleum Products The goal on Petroleum Products was allocated solely to RR 8 Makati City where the head offices of the oil companies are located. b. For All Other Products The goal on all other products was allocated to the regions based on the place of production of such product. 2. Treasury Bills The goal on tax on interest from Treasury Bills was allocated solely to RR6 Manila, since it has jurisdiction over Bangko Sentral ng Pilipinas (BSP) which collects the tax for the BIR 3. Stock Transaction Tax The goal on Stock Transaction Tax under the "Other Percentage Tax" g roup which includes the 2% on IPO per R.A. No. 7717 was allocated solely to RR 7 Quezon City or more specifically to RDO 43 Pasig which has jurisdiction over the Philippine Stock Exchange. 4. Travel Tax Goal on Travel Tax was allocated to RR 6 Manila since the Philippine Tourism Authority which collects the said tax for the BIR is located in Manila. 5. Documentary Stamp Tax Goal on Documentary Stamp Tax which is part of the total goal on "Other Tax" group was allocated to all revenue regions based on adjusted CY 1995 collection. IV. Methodology A. To determine the 1996 Collections as basis for monthly goal allocation The estimated CY 1996 collection presented in Annex D was used as basis for the monthly goal allocation. The estimate is based on actual collections for CY 1995 and January to July 1996. To estimate the collection for each of the months from August to December 1996, get the product of the estimated CY 1996 collection and the ratio of any month from August to December 1995 to CY 1995. Example: August 1996 Collection = August 1995 Collection X CY 1996 Collection CY 1995 Collection B. To determine the CY 1997 regional goal for each major type of tax 1. For Excise Taxes The CY 1997 excise tax is allocated to the revenue regions using the percent share of the regions by products covered by excise tax shown in Annex A. To determine the excise tax goal for a particular product of any region, multiply the percent share to the over-all goal of the particular product. Obtain the excise tax goal for other products following the same procedure and sum the results to get the CY 1997 excise tax goal of a particular region. The excise tax goal by products of each revenue region is shown in Annex B. LLphil Example: 1997 Excise Tax 1995 Percent Share CY 1997 Goal on Alcohol = of Excise Tax on X Excise Goal Products of Alcohol Products of on Alcohol Region 1 Region I Products Follow the same procedure for all other products covered by excise tax and sum the results to obtain the Excise Tax Goal of Region 1. Excise Tax Goal of Region 1 = Excise Tax Goal for Alcohol Products of Region 1 + Excise Tax Goal for Tobacco Products of Region 1 + Excise Tax Goal for Mineral Products of Region 1 + Excise Tax Goal for Miscellaneous Articles of Region 1 + Excise Tax Goal for Tobacco Inspection Fees of Region 1 2. For All Other Taxes Table 2 presents the CY 1997 regional goal by major type of taxes allocated using the percent distribution of the adjusted 1995 regional collection shown in Annex C. To determine the goal of any region for any major type of tax, get the product of the 1995 percent share of the region for the type of tax and the CY 1997 goal of that particular type of tax. Example: 1997 VAT Goal = 1995 Percent share X CY 1997 VAT Goal of Region 1 of Region 1 C. To determine the monthly allocation of the regional goal allocation for each type of tax Table 3-8 show the monthly regional goal distribution for each type of tax based on the percent distribution of the CY 1996 monthly collections presented in Annex D. Example: January 1997 VAT = January 1997 VAT Goal X CY 1997 VAT Goal Goal of Region 1 CY 1997 VAT Goal of Region 1 A detailed discussion of the methodology is presented in Annex E. V. List of Tables and Annexes Table 1 - BIR Collection Goal, CY 1997 Table A - Comparative Over-All Collection Goals, CY 1996-1997 Table B - BIR Comparative Collection Goals by Five Major Type of Taxes, CY 1996-1997 Table 2 - Regional Goal Allocation by Major Source, CY 1997 Table 3 - Total Monthly Tax Goal Allocation by Region, CY 1997 Table 4 - Monthly Income Tax Goal Allocation by Region, CY 1997 Table 5 - Monthly Excise Tax Goal Allocation by Region, CY 1997 Table 6 - Monthly Value-Added Tax Goal Allocation by Region, CY 1997 Table 7 - Monthly Other Percentage Tax Goal Allocation by Region, CY 1997 Table 8 - Monthly Other Taxes Goal Allocation by Region, CY 1997 Table 9 - Monthly Collection Goal by Type of Tax, CY 1997 Table 10 - Comparative Regional Collection Goals of CY 1996 - CY 1997 Table 11 - Desired Level of Collection Performance, CY 1997 Annex A - Percent Share of Revenue Regions by Products Covered by Excise Tax Annex B - Regional Goal Allocation by Products Covered by Excise Tax, CY 1997 Annex C - Adjusted Regional Collection by Type of Tax, CY 1995 Annex D - Monthly Collections by Type of Tax, CY 1996 Annex E - Regional Goal Allocation Methodology VI. Requirement from Revenue Regions The Regional Directors are directed to submit to the Statistics Division on or before February 7, 1997 the following: 1. Distribution of Regional Goals by RDO, by month and by type of taxes following Tables 3-8; 2. Distribution of the 5% additional goal by RDO, by month and by type of taxes shown in Table 11 for performance evaluation purposes; and 3. Tables showing the summary of requirement numbers (1) and (2). VII. Effectivity This Revenue Memorandum Order shall take effect immediately. cdll (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue Table 1 BIR COLLECTIONAL, CY 1997 (In Million Pesos) Table 2 REGIONAL GOAL ALLOCATION BY MAJOR SOURCE, CY 1997 (In Thousand Pesos) Table 3 TOTAL MONTHLY TAX GOAL ALLOCATION BY REGION, CY 1997 (In Thousand Pesos) Table 4 MONTHLY INCOME TAX GOAL ALLOCATION BY REGION, CY 1997 (In Thousand Pesos) Table 5 MONTHLY EXCISE TAX REGIONAL GOAL ALLOCATION BY REGION, CY 1997 (In Thousand Pesos) Table 6 MONTHLY VALUE-ADDED TAX GOAL ALLOCATION BY REGION, CY 1997 (In Thousand Pesos) Table 7 MONTHLY OTHER PERCENTAGE TAX GOAL ALLOCATION BY REGION, CY 1997 (In Thousand Pesos) Table 8 MONTHLY OTHER TAXES GOAL ALLOCATION BY REGION , CY 1997 (In Thousand Pesos) Table 9 MONTHLY COLLECTION GOAL BY TYPE OF TAX, CY 1997 (In Thousand Pesos) Table 10 COMPARATIVE REGIONAL COLLECTION GOALS, CY 1996-CY 1997 (In Thousand Pesos) Table 11 DESIRED LEVEL OF COLLECTION PERFORMANCE, CY 1997 (In Thousand Pesos) Table A COMPARATIVE OVER-ALL COLLECTION GOAL CY 1996-CY 1997 (In Million Pesos) Table B BIR COMPARATIVE COLLECTION GOALS BY MAJOR TYPE OF TAXES CY 1996-CY 1997 (In Million Pesos) ANNEX A PERCENT SHARE REVENUE REGIONS BY PRODUCTS COVERED BY EXCISE TAX ANNEX B REGIONAL GOAL ALLOCATION BY PRODUCTS COVERED BY EXCISE TAX, CY 1997 (In Thousand Pesos) ANNEX C ADJUSTED REGIONAL COLLECTION BY TYPE OF TAX, CY 1995 ANNEX D MONTHLY COLLECTIONS BY TYPE OF TAX, CY 1996 ANNEX E REGIONAL GOAL ALLOCATION METHODOLOGY A. To determine the 1996 Collections as basis for monthly goal allocation The estimated CY 1996 collection presented in Annex D was used as basis for the monthly goal allocation. The equation used to estimate the total collection for CY 1996 is: January-July 1996 CY 1996 = x CY 1995, (Equation 1) January-July 1995 where: CY 1996 = estimated collection for CY 1996 CY 1995 = actual collection for CY 1995 January-July 1996 = actual collection for January to July 1996 January-July 1995 = actual collection for January to July 1995 The equation used to estimate the collection for the months of August to December 1996 is: C95 m C96 m = x CY 1996, (Equation 2) CY 1995 where: C96 m = projected collection for the particular m month of 1996 C95 m = actual collection for the particular m month of 1995 m = 1, 2, 3, 4 and 5 for August to December B. To determine the CY 1997 regional goal for each major type of tax 1. For Excise Taxes The CY 1997 Excise Tax is allocated to the regional offices using the percent distribution shown in annex A. The equations used are: LexLib a. E ij = EP ij * E j (Equation 3) where: E ij = goal of i th region for product j EP ij = percent share of i th region for product j E j = CY 1997 goal for product j I = 1, 2, 3 . . ., revenue regions such that: 1 = RR1,2 = RR2,3 = RR3, . . ., 19 =RR19 j = 1 for alcohol products; 2 for tobacco products; 3 for mineral products; 4 for miscellaneous articles; and 5 for tobacco inspection fees 5 b. E i = E (E ij ), (Equation 4) j=l where: E i = CY 1997 excise goal of the i th region The results of the regional goal for excise tax are shown in Annex B. Example 1: To determine the CY 1997 goal for excise tax of alcohol products of RRI. Given: i = RR 1 j = 1 for alcohol products EP 11 = 0.1465908 (Annex A) E l = P13.257 M (Annex B) Using (equation 3), E 11 = EP 11 * E = 0.1465908 * P13,257 M = P1,943.35 M (Annex B) Following the same procedure for tobacco products, mineral products, miscellaneous articles and tobacco inspection fees, the results are 0. P3.24 M, P0.38 M, and P2.35 M, respectively. Therefore, the excise goal of Region 1 can be obtained using (equation 4). 5 E i = E (E ij ) j=i E = E 11 + E 12 + E 13 + E 14 + E 15 = P1,942.35 M +0 + P3.24 M + P0.38 M + P2.35 M = P1,949.32 M 2. For All Other Taxes Table 2 presents the 1997 regional goal allocation by major type of taxes allocated using the percent distribution of the adjusted 1995 regional collection shown in Annex C. The equation used is: G ik = P ik * G i (Equation 5) where: G ik = goal for i th region for major type of tax k P ik = percent share of i th region for major type of tax k G k = CY 1997 goal of major type of tax k k = 1 for Income Taxes; 2 for VAT; 3 for Other Percentage Taxes; and 4 for Other Taxes Example 2: To determine the CY 1997 value-added tax goal of Region 1. Given: i = Region 1 k = Value-Added Tax P 12 = 0.01076 G 2 = P43,039 M (Table 2) Using (equation 5), G 12 = P 12 * G 2 = 0.01076 * P43,039 M = P463 M (Table 2) Therefore, the CY 1997 value-added tax goal of Region 1 is P463 M. C. Determine the monthly regional goal allocation for each type of tax Tables 3-8 show the monthly regional goal distribution for each type of tax based on the results presented in Annex D. The equations used are: 1) Income Tax I ip = I ip I i * (Equation 6) IG where: I ip = Income Tax goal of region for p month I ip = Income Tax Goal for P= 1, 2, 3, . . . 12 months IG = CY 1997 goal for Income Tax I i = CY 1997 goal for I region of Income Tax 2) Excise Tax E ip = E p * E i (Equation 7) EG where: E ip = Excise Tax goal of I region for p month E p = Excise Tax goal for p = 1, 2, 3, . . ., 12 months IG = CY 1997 overall goal for Excise Tax E i = CY 1997 goal for I region of Excise Tax 3) VAT V ip V p V i * (Equation 8) VG where: V ip = VAT goal for I region for p month V p = VAT goal for p = 1, 2, 3,. . . 12 months VG = CY 1997 overall goal for VAT V i = CY 1997 goal for I region of VAT 4) Other Percentage Tax P ip = P p * P i (Equation 9) PG where: P ip = Other Percentage Tax goal of I region for p month P p = Other Percentage Tax goal for p =1, 2, 3, . . ., 12 months PG = CY 1997 goal for Other Percentage Tax P i = CY 1997 goal for I region of Other Percentage Tax 5) Other Taxes O ip = O p * O i (equation 10) where: O ip = Other Taxes goal of I region for p month O p = Other Taxes goal for p = 1, 2, 3,. . ., 12 months OG = CY 1997 goal for Other Taxes O i = CY 1997 goal for I region of Other Taxes Example 3: To determine the value-added tax goal for January of Region 1. Given p = January V 1 = P3,375.4 M (Table 6) VG = P43,039 M (Table 6) V 1 = P463.2 M (Table 6) Using (equation 8), V 11 = V 1 * V 1 VG = P3,375.4 M * P463.2 M P43,039 M = P36.33 M (Table 6) Therefore, the VAT goal for January of Region 1 is P36.33 M.