Business Bureaucracy 9, Land title registration

A friend who is still enamored with the idea of more government regulation of markets, Floro Francisco, had a little shock of his life when he experienced government bureaucracies first hand. He posted this yesterday in his fb wall, reposting with his permission. Thanks Floro.

The images I got from the web and just added them here.
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Whew, just got back from following up documentary requirements from the BIR, Municipal Hall and the Register of Deeds for the transfer of the land title under my name for a piece of land I bought. Wow so many requirements I had to accomplish and the funny part is I have to submit almost similar requirements to 3 government agencies. And boy the amount of taxes and filing fees I have to pay was a bit shocking: 6.0% for Capital Gains Tax, 1.5% for Documentary Stamps to be paid at the BIR based on the purchase amount of the property. And then you pay also 0.50% for the Transfer Fee of Title at the Munisipiyo. And then another > 1.0% approximately to the Register of Deeds!

On top of these you need to pay the Munisipiyo for a certification of your Tax Declaration and another certification for the Tax Clearance and yet another for the Certification of No Development on the land. And you do not get to know all these payments on the first day you visit them unless you get or better yet make a checklist of the 3 agencies of government. You also had to pay for a Certified Xerox Copy from the Register of Deeds for the Duplicate of the Land Title even if you have a copy of the original owner's duplicate.

It is painstaking hard work and patience. If you play fair like me and do not go through the channel of experts and facilitators lurking around. You might need several months to complete these tasks. If you are not intelligent and ask the right questions to the right people, may be it would take you a year or two to finish everything only for a small piece of land. What if you lacked communication skills and knowledge about documentations? I wonder what happens to the lowly farmers who inherit or buy lands and the agrarian reform beneficiaries who had to deal with such government requirements to get their names on their properties.

I think I should find a politician or become a politician myself to push for reforms in such a bureaucratic mess! No wonder many lazy inheritors just leave their properties to be taken over by knowledgeable government officials and politicians! I think there is injustice there somewhere in terms of the amounts to be paid and the processes to be followed as well as the volume of documentary requirements. Yung ibang maliliit pampa-xerox lang eh wala na, yung pang taxes and processing fees pa kaya mabayaran nila? Some progressive form of taxation in this regard is much needed. A one stop shop processing system that would simplify the procedures need to be pushed! I am actually about to go through the same process for some properties we inherited from our parents and Sister which remain un-acted upon for years since they died because I nor my brother had the material time to do it. It may require that I take a leave from work to attend to these! Ah Bureaucracy! I wish I was born to a Dynasty!

… Ironically in my case mas nahirapan ako sa BIR kung saan mas maraming requirements at mas mahal ang bayarin! Also now you have to be computer literate to deal with BIR kasi you have to fill e-Forms sa eBIR. Paano na ang ka-awawang Magsasaka! Mas madali sa Register of Deeds! Kaya lang yung IT fees nila mahal! Pero tingin ko diskarte sa itaas yung IT Fees At sakop lang ng isang private servicing company yan kasama ng ID system ng SSS, GSIS at Pag-ibig pati ang Drivers License!

Some comments by his friends (I made minor revisions to #1 to make it more readable):

1. may bibilhin govt sa amin (lupa) na maliit lang naman, gagawin service road.. kaso mas malaki daw yung tax na babayaran namen compare sa ibabayad nila.. take note, hindi pa nila nare-release amount ng bayad nila, pero my computation na ng taxes na need bayaran.. at nakakaloka, binigyan kami ng two options, isang mas mataas n babayaran at isang binabaan ng around 3 percent ..whew..

2. yung mga "lazy inheritors" ay hindi talaga "lazy" in the real sense of the word. Marami lang po sa kanila ang walang pambayad sa Estate Taxes, at kung anu-ano pa pong ibang klase ng fees and taxes, para sa transfer ng title sa pangalan ng mga heirs. Idagdag pa ang layo ng locasyon ng namana. Kailangan mo munang umalis sa trabaho upang makasunod sa pinapatupad na proceso ng gobyerno, na kadalasan naman ay nakakalito sa common tao.

3. Don't forget sir that there are Land grabbing syndicates who have ties with officials of LRA and Register of Deeds.

4. These seemingly rigid requirement of the Register of Deeds are the causes of fraud and anomaly in the registration of real properties. It is almost impossible for poor landowners to effect the transfer of title to them!

5. Ha ha funny how you started your cycle, BIR payments agad... The cycle actually starts from acquiring a certified true copy of the title from RD, then Municipal level, then provincial level, then BIR, then the Register of Deeds,,, after this good luck on how soon you can get your title, unless you know somebody from Rd so that release of the title can be expedited!!!

I also commented that it's a good experience for Floro. And we may wonder why many people are still enamored with "more government intervention/regulations" mantra. 

Someone said that the purpose of government is to expand government. Somehow this is true. And that explains why I and other friends campaign and advocate for minimal or limited government, more market competition, more civil society role.

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See also:

Business Bureaucracy 5: Doing Business 2012 Report, August 28, 2012

Business Bureaucracy 6: Presentation at Rotary Club of Manila Bay, February 01, 2013 

Business Bureaucracy 7: Penalizing Small Businesses, February 01, 2013 

Business Bureaucracy 8: Exchanges at Imperium et Populi (Philippines), June 12, 2013

Tax Cut 19: BIR Regulations for the Self Employed and POHTA

The Bureau of Internal Revenue (BIR) produced a new regulation last month. Here's the news from BusinessWorld last March 21, 2014:

Posted on March 21, 2014 07:30:38 PM

New rules for self-employed professionals

SELF-EMPLOYED professionals will now be required to submit a list of their service fees as part of registering with the Bureau of Internal Revenue (BIR), which is spearheading the government’s efforts to improve monitoring of the sector’s tax compliance.

 Revenue Regulations 4-2014 (RR), dated March 3 and published in a newspaper Friday, imposes new requirements for the registration of professionals with bureau, meant to "aid ... in conducting tax audit and boost revenue collections in such sectors".

"In line with the BIR’s campaign to promote transparency and to eradicate tax evasion among self-employed professionals, the BIR has consistently enjoined them to comply with the BIR’s requirements on registration...," the regulations state. "In order to complement these efforts, there is a pressing need to monitor the service fees charged by self-employed professionals."

"In addition to the requirements for annual registration, all self-employed professionals shall submit an affidavit indicating the rates, manner of billings, and the factors they consider in determining their service fees upon registration and every year thereafter on or before January 31," it noted.

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Comments from some friends of this new BIR regulation in facebook:

1. The BIR is making it more complicated. Make it simple so it's easier to comply! There are a few things where harder is better and this is not one of those.

2. They are asking for a revolt. And how am I supposed to give them a schedule of standard costs? Bawat proect ko iba-iba ang presyo. Tell them how I compute my price? There is no equation. It's mostly gut feel. So paano na?

3. They don't even understand how the industry works. How rates vary with a professional's skill level in relation to a project's time frame. etc etc ang dami e.

4. They are asking for peripheral evidence of business operations beyond receipts and tax declarations. This will give them a separate metric to compute your taxes. Or how much taxes they think you should be paying. If they see a lot of appointments in your book of appointments, but you tendered few ORs, they will tag you as a tax-evader. Freelancers know that only a small percentage of meetings become income sources. And it becomes the freelancer's burden to prove that they paid the correct amount of tax.

This is tantamount to being witnesses against ourselves. Even as a non-lawyer, I know that that is not legal. This is nothing but oppression.

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Another friend suggested to create a new group, the Professionals Opposed to Harassment by the Tax Authority (POHTA). It's a joke of course, the acronym is simply funny. (For non-Filipino readers, "puta" or "pota" is Filipino word for bitch). 

Government is getting more tax hungry. There should be a Civil Service Commission (CSC) regulation, or perhaps a law, mandating that government work, local and national agencies combined, elected and appointed combined, should be max 10 years, Peole in government should learn to work in the private sector and be net taxpayers, be subjected to the same rules, laws and prohibitions that they have created and/or implemented, instead of being bureaucrats forever.

One problem here is that ALL agencies in the government are begging, pleading and crying, "we need more money". From agri to public works to police to LGUs to military and its "new $524 M jet fighters procurement" and various "save the planet" spending like the $400 M (P17.2 B) ADB loan for e-tricycles and so on. BIR is under pressure by all those agencies and Congress, so BIR is now pressuring the professionals in the private sector. It's the whole philosophy of ever-expanding government ever-expanding taxes and tax harassment.

A citizens revolt, active or passive, against endless expansion of government and their endless wastes and corruption, against endless taxation and harassment, should build soon. A policy of tax cut not tax hike, tax simplification not complication, should be advanced.

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See also:
Tax Cut 15: Some Resistance to Reducing Personal Income Tax, May 04, 2013
Tax Cut 16: Conserving Fishery Resources by Taxing Demersal Fish Catch?, May 27, 2013 
Tax Cut 17: BIR vs. Physicians, March 06, 2014 
Tax Cut 18: On 10% Flat Tax, Greco Belgica and GDP Growth, March 27, 2014

D.Ricardo, JS Mill, A.Smith and Bong Mendoza on Taxes, BIR vs. Doctors

Two good essays here by a friend, Dr. Amado "Bong" Mendoza of the UP Political Science Department. There is a need of course to justify which are the real "public goods" that need continued provision by government and hence, would need continued taxation. There is a growing role for corporate and civil society sectors in providing many public goods that used to be monopolistically provided by governments then. Like quick dispatch of relief goods and food items to victims of calamities like heavy flooding and storm surges. Or residential villages that provide many services to the community, from roads/drainage construction and maintenance, street lighting and security, and they collect annual association dues and various fees -- these serve in effect as taxes and regulatory fees .
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Taxation: coercive and consensual

March 06, 2014

In theory, taxation is essentially coercive because taxes are never paid voluntarily. However, taxes are supposedly collected not only for purpose of collecting them but to finance public goods. Thus, consensual taxation is possible since private taxpayers desire public goods (the reason why they left the state of nature in the first place).

In comparing coercive and consensual or negotiated taxation, Michael Moore of the University of Sussex, not the controversial film-maker, argued that the latter constituted a better institutional technology. Coercive taxation (largely in agrarian societies) is relatively ineffective since it tends to generate resistance and because coercive tax collectors were well placed to pocket a large part of the proceeds for themselves. In contrast, consensual taxation offers (within the boundaries of individual states) joint gains for both rulers and taxpayers.

In the late 18th century, the idea that citizens must contribute to the upkeep of a state was developed.  On of the political economists of the time, Adam Smith forwarded four maxims of taxation (equity, certainty, convenience, and efficiency).  These maxim were also supported subsequently by David Ricardo and John Stuart Mill:

1. “The subjects of every state ought to contribute to the support of the government, as nearly as possible in proportion to their respective abilities: that is, in proportion to the revenue which they respectively enjoy under the protection of the state. In the observation or neglect of this maxim consists what is called the equality or inequality of taxation.

2. “The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise, every person subject to the tax is put more or less in the power of the tax-gatherer, who can either aggravate the tax upon any obnoxious contributor, or extort, by the terror of such aggravation, some present or perquisite to himself. The uncertainty of taxation encourages the insolence and favours the corruption of an order of men who are naturally unpopular, even when they are neither insolent nor corrupt. The certainty of what each individual ought to pay is, in taxation, a matter of so great importance, that a very considerable degree of inequality, it appears, I believe, from the experience of all nations, is not near so great an evil, as a very small degree of uncertainty.

3. “Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it. A tax upon the rent of land or of houses, payable at the same term at which such rents are usually paid, is levied at a time when it is most likely to be convenient for the contributor to pay; or when he is most likely to have wherewithal to pay. Taxes upon such consumable goods as are articles of luxury are all finally paid by the consumer, and generally in a manner that is very convenient to him. He pays them by little and little, as he has occasion to buy the goods. As he is at liberty, too, either to buy or not to buy, as he pleases, it must be his own fault if he ever suffers any considerable inconvenience from such taxes.

4. “Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state. A tax may either take out or keep out of the pockets of the people a great deal more than it brings into the public treasury, in the four following ways. First, the levying of it may require a great number of officers, whose salaries may eat up the greater part of the produce of the tax, and whose perquisites may impose another additional tax upon the people.” Secondly, it may divert a portion of the labour and capital of the community from a more to a less productive employment. “Thirdly, by the forfeitures and other penalties which those unfortunate individuals incur who attempt unsuccessfully to evade the tax, it may frequently ruin them, and thereby put an end to the benefit which the community might have derived from the employment of their capitals. An injudicious tax offers a great temptation to smuggling.

Fourthly, by subjecting the people to the frequent visits and the odious examination of the tax-gatherers, it may expose them to much unnecessary trouble, vexation, and oppression:” to which may be added, that the restrictive regulations to which trades and manufactures are often subjected to prevent evasion of a tax, are not only in themselves troublesome and expensive, but often oppose insuperable obstacles to making improvements in the processes.

To Adam Smith’s mind, bad governance is excessive taxation of capital and property. Not taxation per se, as he recognized the need for public goods and the role of the state in the provision of such goods. Bad governance discourages investment and owners of transportable assets can readily change domiciles to jurisdictions with acceptable tax burdens. Smith argued that a tax burden is acceptable to businessmen if the state is able to provide an equally acceptable bundle of public goods.

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The limits of public shaming

March 13, 2014

The controversy generated by BIR Commissioner Kim Henares' shaming indictment of an entire profession reminds me of these words I wrote earlier.

Tax Cut 17: BIR vs. Physicians

The Bureau of Internal Revenue (BIR) made this paid advertisement that appeared in several national newspapers last weekend I think. 

Posting below some comments by doctors expressed in facebook, posted on my friend Dr. Jed Inciong's fb wall, except those from change.org petition and Dr. Calimag. My own discussion at the end. Other posters/images are also posted in fb, copy-pasting them here.

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(1) Change.org Petition (around March 2, 2014, initiated by Minerva Calimag)

The medical profession and all physicians are always portrayed as tax evaders by the BIR. The recent BIR Ad that appeared in the Manila Bulletin is certainly discriminatory of the medical profession. Many of us physicians pay our taxes diligently...should the indiscretions of a few be invoked to penalize the entire medical profession? Many physicians also work in the countryside and they are often overworked and compensated less...this overgeneralization on the part of the BIR certainly maligns the medical profession. We demand that the BIR retract this Ad and issue a public apology in all newspapers for this act.

(2) Butch Tamesis, March 4, 2014

This picture shows the PHYSICIAN in general as a burden to the TEACHER, a representative of the MASA. I wonder if the BIR has really thought about this carefully? BIR is actually inciting the masa to revolt against the doctors and blame them as the cause of their poverty. PAMPABIGAT KAMING MGA MANGGAGAMOT SA MGA MAHIHIRAP! 

Does BIR honestly believe this? I will not repeat what my colleagues have said already against the BIR, but just enlighten you about my sentiments. 

In plain language, I am saddened by your portrayal of me as a burden to the society. After so many years of hard work, and sacrifice to help Filipinos (in general), I now live comfortably, able to sustain my family's needs. And this is how you treat me, as a burden to society!? My parent's left me with a wonderful name, a name I am constantly taking good care of. After my father died, the clinic he left was in shambles as his practice had diminished since he got sick. My sisters and I slowly picked up the pieces and built it back to its old glory. The taxes we pay the government ( yearly business tax, machinery tax, real property tax, tax on improvement, garbage tax, sanitation tax, fire and hazard tax), monthly SSS, Philhealth, Pag-Ibig contributions, VAT (not ours anyway since we collect it for the government) is so much that we barely have savings for the clinic on infrastructure improvements.

My clinic is a medical clinic, not a business enterprise, and yet the instruments to make my skills viable is taxed so much that I have no way of recovering the cost unless I charge my patients for its use. A lot of times I don't charge my patients since they cannot afford it. Medicines I prescribe are also taxed exorbitantly by government (i thought the government is pro people?). Electricity and water, and my gasoline expenses have been constantly going up. I am forced to buy electric fans and air conditioners to make my patients comfortable. That adds to my cost of electricity. And you Commissioner Henares and the BIR look at me as a burden to society???!

I have nothing else to say to you, no threats, no dirty finger, no nothing. At my senior age, I am no longer as violent as I was when i was younger since I saw the futility of being a hot head. I am done with that. But I would HUMBLY and RESPECTFULLY ask you to take a second look at this disgusting picture you have portrayed my profession to be. Please take it back because it slaps every physician (guilty or not) on the face. Prosecute these erring physicians, businessmen, lawyers, etc. but please, do not generalize because even JOSE RIZAL OUR NATIONAL HERO IS ALSO GETTING THE HEAT.

My comment comes from the heart, and I feel it every time I read it. Considering the amount of time I spend treating and caring for my patients, sometimes to the point of giving them free consult (in the clinic, by text, or by phone call anytime of the day,or by email) and medicine if they cannot afford it, I get this distasteful ad from BIR. I cannot NOT take it personally!

And the comments of some people against the doctors also hurt. But it does not matter. What matters most is one, our guilty colleagues must change their ways, and two, BIR must also take it back.

(3) Jed Inciong, March 3, 2014

Much like the persecution of jews in Nazi Germany. Our Doctors are being made "whipping boys" and scapegoats for a flawed income tax collection system. Our physicians are being portrayed as contemptuous cheaters.

All said, it pains me to admit I may have made the wrong choice to stay and practice medicine here in my beloved "Inang Bayan" katangi-tanging Pilipinas!
Ninais na manilbihan sa mga kababayang nangangailangan, kahit na higit na mas malaki ang kikitain sa ibang bayan. Dahil sa pagmamahal sa Bayang tinubuan!