Background of the Study

In every country, the government is responsible for financing public services. To fulfill their duties they need to have a source of revenue in which majority of it comes from taxation, charges and fees. Taxation is the imposition of a mandatory levy on the citizens and/or the businesses of a country by their government. Charges refer to pecuniary liability, as rents or fees against persons or property while fee means a charge fixed by law or ordinance for the regulation or inspection of a business or activity. The main purpose of taxation is to accumulate funds for the functioning of the government machineries. No government in the world can run its administrative office without funds and it has no such system incorporated in itself to generate profit from its functioning. Taxation has four main purposes or effects: the most widely known function which is the Revenue where taxes raise money to spend on roads, schools and hospitals, and on more indirect government functions like market regulation or justice systems; Redistribution which normally means transferring wealth from the richer sections of society to poorer sections., Repricing where taxes are levied to address externalities: tobacco is taxed, for example, to discourage smoking, and many people advocate policies such as implementing a carbon tax; and Representation where rulers tax citizens, and citizens demand accountability from their rulers as the other part of this bargain.

Local Government Taxation in the Philippines is based on Republic Act 7160, otherwise known as Local Government Code of 1991 which was signed into law on 10 October 1991 and took effect on 1 January 1992. Local government taxation and other fiscal matters are contained in Book II of the Local Government Code. These include real property taxation, shares of local governments in the proceeds of national taxes, credit financing and local budgets including property and supply management.

History of Taxation in the Philippines

To raise income to support the government, the Spaniards imposed several forms of taxes and monopolies. The tribute (buwis, later replaced by the cedula

personal or personal identity paper) may be paid in any kind. It was fixed at 8 reales and later, increased to 15. Ten reales goes to the government, 1 to the town community chest and 3 to the Church. Another one real was for tithes (diezmo prediales). Also collected is the bandala, an annual enforced sale and requisitioning of goods such as rice. Custom duties and income tax are also collected. Later, they imposed Cedula personal, wherein all indios are required to pay for personal identification. Indios from the age of 18 to 60 are obliged to pay. Forced Labor (Polo y Servicio) - Polo is the forced labor for 40 days of men ranging from 18 to 20 years of age who were obligated to give personal service to community projects. One could be exempted from polo by paying the falla, a daily fine of one and a half real. In 1884, it was reduced to 15 days. Encomienda System - The encomienda system is a land management system similar to the feudal system in Europe. Here, a meritorious Spaniard (called an encomendero) is given control over a piece of land and all its inhabitants. The encomendero is dutybound to defend his encomienda and keep peace and order there. In return, he was granted the right to collect tribute according to the limit. Part of this tribute goes to the encomendero and the rest to the Church and government. This is subject, however to several abuses. Manila-Acapulco Galleon Trade - The Manila-Acapulco Trade is generally a trade between the Chinese and Spaniards in Manila and the Spaniards in Mexico. This has resulted into economic progress. But the negative effects of it far outbalanced the advantages. Some income-producing economies were completely neglected and too much burden was given to Filipinos during their annual polo y servicio.

The residence tax, and in turn, the cdula, were abolished with the coming of American rule. No such tax would be imposed again until January 1, 1940, when Commonwealth Act No. 465 went into effect, mandating the imposition of a base residence tax of fifty centavos and an additional tax of one peso based on factors such as income and real estate holdings. The payment of this tax would merit the issue of a residence certificate. However, persons who are ineligible to pay the residence tax may

be issued a certificate for twenty centavos. Corporations were also subject to the residence tax.

Commonwealth Act No. 465 mandated that the High Commissioner and his staff, members and employees of the United States Armed Forces, visitors and consular staff were exempt from paying the residence tax, and as such are not given a residence certificate. Following Philippine independence, the same provisions were kept in effect. However, the changing socio-political climate necessitated the reform of certain provisions of Commonwealth Act No. 465. Significant amendments to the residence tax law were put into effect first in 1973, following the enactment of the Local Tax Code, with amendments on the allocation of the residence tax and on who are covered under it, as well as payment provisions. The same provisions from the Local Tax Code were later subsumed into the Local Government Code of 1991. The residence tax and residence certificate were renamed into the current community tax and community tax certificate.

Local Government Tax Law

Local government taxation in the Philippines is based on the constitutional grant of the power to tax to the local governments. Local taxes may be imposed, as the Constitution grants, to each local government unit, the power to create its own sources of revenues and to levy taxes, fees, and charges which shall accrue to the local governments (Article X, Section 5). With respect to national taxes, local Government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them (Article X, Section 6). Local government taxation and other fiscal matters are contained in Book II of the Local Government Code. These include real property taxation, shares of local governments in the proceeds of national taxes, credit financing and local budgets including property and supply management.

Fundamental Principles of LGU Tax Powers The following fundamental principles shall govern the exercise of the taxing and other revenue raising powers of local government units: (1) Taxation shall be uniform in each local government unit;

(2) Taxes, fees, charges and other impositions shall:

(a) be equitable and based as far as practicable on the taxpayer's ability to pay; (b) be levied and collected only for public purposes; (c) not be adjust, excessive, oppressive, or confiscatory; (d) not be contrary to law, public policy, national economic policy, or in restraint of trade;

(3) The collection of local taxes, fees, charges and other impositions shall in no case be let to any private person;

(4) The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and be subject to disposition by, the local government unit levying the tax, fee, charge or other imposition unless otherwise specifically provided herein; and,

(5) Each local government unit shall, as far as practicable, evolve a progressive system of taxation.

Common Revenue-Raising Powers

(1) Service Fees and Charges. - Local government units may impose and collect such reasonable fees and charges for services rendered. (2) Public Utility Charges. - Local government units may fix the rates for the operation of public utilities owned, operated and maintained by them within their jurisdiction.

(3) Toll Fees or Charges. - The sanggunian concerned may prescribe the terms and conditions and fix the rates for the imposition of toll fees or charges for the use of any public road, pier or wharf, waterway, bridge, ferry or telecommunication system funded and constructed by the local government unit concerned: Provided, That no such toll fees or charges shall be collected from officers and enlisted men of the Armed Forces of the Philippines and members of the Philippine National Police on mission, post office personnel delivering mail, physically-handicapped, and disabled citizens who are sixtyfive (65) years or older. When public safety and welfare so requires, the sanggunian concerned may discontinue the collection of the tolls, and thereafter the said facility shall be free and open for public use. Some illustrative revenue raising powers of local governments are: Provinces: Tax on transfer of real property ownership. A tax on the sale, donation, barter, or on any other mode of transferring ownership or title of real property at the rate of not more than fifty percent (50%) of one percent (1%) of the total consideration involved in the acquisition of the property or of the fair market value in case the monetary consideration involved in the transfer is not substantial, whichever is higher. The sale, transfer or other disposition of real property pursuant to R.A. No. 6657 shall be exempt from this tax. (Section 185, Art. 1 Chapter 2 Book II of LGC) Tax on business of printing and publication. A tax on the business of persons engaged in the printing and/or publication of books, cards, posters, leaflets, handbills, certificates, receipts, pamphlets, and others of similar nature, at a rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year. The receipts from the printing and/or publishing of books or other reading materials prescribed by the Department of Education, Culture and Sports, as school texts or references shall be exempt from the tax. (Section 136 Art. 1 Chapter 2 Book II of LGC) Franchise tax. A tax on businesses enjoying a franchise, at a rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding

calendar year based on the incoming receipt, or realized, within its territorial jurisdiction. (Section 137, Art. I Chapter 2 Book II of LGC) Sand and gravel tax. A tax levied and collected not more than ten percent (10%) of fair market value in the locality per cubic meter of ordinary stones, sand, gravel, earth, and other quarry resources, as defined under the National Internal Revenue Code, as amended, extracted from public lands or from the beds of seas, lakes, rivers, streams, creeks, and other public waters within its territorial jurisdiction. The proceeds of the tax on sand, gravel and other quarry resources shall be distributed as follows: Province 30%; Component city or municipality where the sand, gravel, and other quarry resources are extracted - 30%; and Barangay where the sand, gravel, and other quarry resources are extracted - 40%. (Section 138 Art. I Chapter 2 Book II of LGC) Professional tax. A tax on each person engaged in the exercise or practice of his profession requiring government examination at such amount and reasonable classification as the sangguniang panlalawigan may determine but shall in no case exceed Three hundred pesos (P=300.00). (Section 139 Art. I Chapter 2 Book II of LGC) Amusement tax on admission. Tax to be collected from the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement at a rate of not more than thirty percent (30%) of the gross receipts from admission fees (Section 140 Art. I Chapter 2 Book II of LGC) Annual fixed tax per delivery truck or van of manufacturers or producers of or dealers in certain products. An annual fixed tax for every truck, van or any vehicle used by manufacturers, producers, wholesalers, dealers or retailers in the delivery or distribution of distilled spirits, fermented liquors, soft drinks, cigars and cigarettes, and other products as may be determined by the sangguniang panlalawigan, to sales outlets, or consumers, whether directly or indirectly, within the province in an amount not exceeding Five hundred pesos (P500.00). (Section 141 Art. I Chapter 2 Book II of LGC)

Municipalities:

Tax on business on (a) manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and compounders of liquors, distilled spirits, and wines or manufacturers; (b) wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature; (c) exporters, and on manufacturers, millers, producers, wholesalers, distributors, dealers or retailers of essential commodities; (d) retailers; (e) contractors and other independent contractors; (f) banks and other financial institutions; (g) peddlers engaged in the sale of any merchandise or article of commerce; and (h) any business, not otherwise; (2) Fees and charges on business and occupation and, except as reserved to the province in Section 139 of this Code; (3) Fishery rental or fees and charges. Municipalities shall have the exclusive authority to grant fishery privileges in the municipal waters and impose rentals, fees or charges; (4) Fees for sealing and licensing of weights and measures; and Community tax.

Cities

The city may levy and collect among others any of the taxes, fees and other impositions that the province or municipality may levy and collect.

Barangays

Taxes and fees on stores or retailers with fixed business establishments with gross sales or receipts of the preceding calendar year of Fifty thousand pesos (P=50,000.00) or less, in the case of cities and Thirty thousand pesos (P=30,000.00) or less, in the case of municipalities, at a rate not exceeding one percent (1%) on such gross sales or receipts; (2) Service charges for services rendered in connection with the regulation or the use of barangay-owned properties or service facilities such as palay, copra, or tobacco dryers; (3) Barangay Clearance - No city or municipality may issue any license or permit for any business or activity unless a clearance is first obtained from the barangay where such business or activity is located or conducted;

Community Tax

Community tax shall be paid in the place of residence of the individual, or in the place where the principal office of the juridical entity is located. A community tax certificate shall be issued to every person or corporation upon payment of the community tax. Cities or municipalities may levy a community tax to the following: (1.) Legal Individuals. Every inhabitant of the Philippines eighteen (18) years of age or over who has been regularly employed on a wage or salary basis for at least thirty (30) consecutive working days during any calendar year, or who is engaged in business or occupation, or who owns real property with an aggregate assessed value of One thousand pesos (P=1,000.00) or more, or who is required by law to file an income tax return shall pay an annual community tax of Five pesos (P=5.00) and an annual additional tax of One peso (P=1.00) for every One thousand pesos (P=1,000.00) of income regardless of whether from business, exercise of profession or from property which in no case shall exceed Five thousand pesos (P=5,000.00). In the case of husband and wife, the additional tax herein imposed shall be based upon the total property owned by them and the total gross receipts or earnings derived by them. (2.) Juridical Persons. - Every corporation no matter how created or organized, whether domestic or resident foreign, engaged in or doing business in the Philippines shall pay an annual community tax of Five hundred pesos (P=500.00) and an annual additional tax, which, in no case, shall exceed Ten thousand pesos (P=10,000.00)

Authority and Limitation of LGU to Tax

(1) Exercise the power to levy taxes, fees or charges [through passing of tax ordinance by the Sanggunian] on any base or subject not otherwise specifically enumerated herein or taxed under the provisions of the National Internal Revenue Code, as amended, or other applicable laws. The ordinance levying such taxes, fees or charges shall not be enacted without any prior public hearing conducted for the purposes. (Book II, Title I, Chapter V SEC. 186 of LGC)

(2) The enforcement of any tax ordinance or revenue measure after due notice of the disapproval or suspension thereof shall be sufficient ground for administrative disciplinary action against the local officials and employees responsible (Book II, Title I, Chapter V SEC. 190 of LGC)

(3) Adjust Rates of Tax ordinances once every five (5) years, but in no case shall such adjustment exceed ten percent (10%) of the rates fixed. (Book II, Title I, Chapter V SEC. 187 of LGC)

(4) Authority to Grand and Withdraw Tax Exemption Privileges through ordinances duly approved, grand and withdraw tax exemptions, incentives of reliefs under such terms and conditions (Book II, Title I, Chapter V SEC. 192-193 of LGC)

(5) Refund of Tax Credit.

Taxes may not be imposed by Local Government Units

(1) Income tax, except when levied on banks and other financial institutions;

(2) Documentary stamp tax;

(3) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise provided herein;

(4) Customs duties, registration fees vessels and wharfage on wharves, tonnage dues, and all other kinds of customs fees, charges and dues except wharfage on wharves constructed and maintained by the local government unit concerned;

(5) Taxes, fee and charges and other impositions upon goods carried into or out of, or passing through, the territorial jurisdictions of local government units in the guise of

charges for wharfage, tolls for bridges or otherwise, or other taxes, fees or charges in any form whatsoever upon such goods or merchandise; (6) Taxes, fees, or charges on agricultural and aquatic products when sold by marginal farmers or fishermen;

(7) Taxes on business enterprises certified to by the Board of Investments as pioneer or non-pioneer for a period of six (6) and (4) four years, respectively from the date of registration;

(8) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products;

(9) Percentage or value added tax (VAT) on sales, barters or exchanges or similar transactions on goods or services except as otherwise provided herein;

(10) Taxes on the gross receipts of transaction contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except as provided in this Code;

(11) Taxes on premium paid by way or reinsurance or retrocession;

(12) Taxes, fees or charges for the registration of motor vehicle and for the issuance of all kinds of licenses or permits for the driving thereof, except tricycles;

(13) Taxes, fees or charges on Philippine products actually exported, except as otherwise provided herein;

(14) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered Sixty nine hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperatives Code of the Philippines" respectively; and

(15) Taxes, fees or charges, of any kind on the National Government, its agencies and instrumentalities, and local government units.

Collection of Taxes

The tax period of all local taxes, fees and charges shall be the calendar year. All local taxes, fees, and charges shall be paid within the first twenty (20) days of January or of each subsequent quarter, as the case may be. The sanggunian concerned may, for a justifiable reason or cause, extend the time for payment of such taxes, fees, or charges without surcharges or penalties, but only for a period not exceeding six (6) months. The sanggunian may impose a surcharge not exceeding twenty-five percent (25%) of the amount of taxes, fees or charges not paid on time and an interest at the rate not exceeding two percent (2%) per month of the unpaid taxes, fees or charges including surcharges, until such amount is fully paid but in no case shall the total interest on the unpaid amount or portion thereof exceed thirty-six (36) months. All local taxes, fees, and charges shall be collected by the provincial, city, municipal, or barangay treasurer, or their duly authorized deputies. The provincial, city or municipal treasurer may designate the barangay treasurer as his deputy to collect local taxes, fees, or charges. The City Treasurers Office is in charge of exercising proper management and disbursement of local funds and implements tax ordinances and other powers and duties as may be prescribed by law. It is responsible for all the payments and collections in their municipality. It is divided into divisions namely: Administrative Division, Cash, Real Property Tax and Business Tax Division. The Administrative Division is in charge of administrative works such as managing the three divisions. Cash Division consists of disbursement and cash receipts which refer to the settlement of government payables/obligations by cash or checks and community taxes. Before the business establishments could pay and secure Mayor's Permit on Business Licenses, they need to present the business application in the Business Tax Division for the

Assessment of tax due. The verification, computation, review, postings and Issuance of Realty Tax Clearance of individual and corporate realty tax payers is the function of Real Property Tax Division. These divisions work together to manage the governments sources of revenue.

Procedures involved in tax collection greatly depend on what type of tax is to be collected. For real property tax, the Real Property Order of Payment (RPTOP) form accomplished by the Assessors Office should first be presented by the taxpayer to the collector for the computation and acceptance of payments. As for taxes on goods and services, acceptance payments form taxpayers could only be resorted to after evaluation and assessment of the application form accomplished by the taxpayer/s. On the procedures enforced in the collection of operating and service income, it was found out that, except for market fees and cemetery fees, no bidding was conducted for fishing grant within the municipal waters. As regards to the collection of miscellaneous/other taxes, different procedures were performed in the collection of sand and gravel fees and registration fees from owners of large cattle. There were no existing procedures in the collection of amusement taxes, dog registration and impounding fees and vehicle fees. Meanwhile, services/facilities used by the respondents were found to be adequate in the performance of their functions. Although safes were not provided to the collectors, their remittances were done daily to the Municipal Treasurer. As regard to problems encountered in collecting taxes, the absence of Real property Order of Payment (RPTOP) hampered the immediate processing and acceptance of payment from taxpayers. Emanating from other factors were the dishonesty of taxpayers in the declaration of their income/gross sales from their businesses, beating the deadline for their payment of taxes, intercessions of some politicians for the reduction of taxes to be paid, business without the necessary permits and bribery.

Finance Secretary Cesar Purisima is urging the Bureau of Internal Revenue (BIR) and the treasurers and assessors of local government units to improve the sharing of information between them and adopt a scorecard as part of efforts to boost the

governments revenue collection. Speaking before the Philippine Association of Local Treasurers and Assessors, he told local government units to update the schedule of market values (SMVs) for real property tax collections and make a scorecard for treasurers and assessors for greater accountability.

Several LGUs have not updated their SMVs in years, leading to inaccurate prices. Based on estimates from the Asian Development Bank, SMVs lag true market values by 200 percent to 500 percent. According to outdated, long-neglected SMVs, land in Quezon City is priced even cheaper than in Naga City. The internal revenue allotment (IRA) dependence has led many LGUs to become lax on their performance. As of 2011, 21 of 122 cities and 631 of 1,512 municipalities, and 51 of 80 provinces derive more than 80 percent of their revenues from the IRA.

Local assessors have a direct influence on real property taxes which have great potential to boost revenues. Real property tax is decided by assessments of land value according to the Schedule of Market Values, maintained by LGUs. From 2009 to 2010, real property tax at the city, municipal, and provincial level had negative collection growth rates, with a 9.8 percent decline across all three levels. Preliminary 2011 data, however, show an upward trend from 2010. According to Purisma, LGUs must work together with the BIR to improve national tax collection, which will translate into more funds for all, through a larger IRA. With LGU registrations of businesses, property, decedents, and other records, we can develop better tax maps to improve compliance.

Like real property taxes, business tax collection shrank from 2009 to 2010 for cities, provinces and municipalities. Cities and provinces, however, have posted increases from 2010 to 2011 given currently reported collections. Provincial business tax rose from P653 million in 2009 to P814 million in 2011 while cities collected at least P27.4 billion in 2011 compared to P26.3 billion in 2009. Municipal business tax collections amounted to P3.59 billion in 2011, up from P4.99 billion in 2009.

Sources of income for local government units are very broad making its management complicated. In the past, collection of taxes and revenues is already tedious because there is no system that can help to lessen paper works with efficiency. Long lines for taxpayers are always present because processing transaction is slow. Another effect is the decrease in the collection rate that can la rgely affect the nations fund. And as government implements additional taxes and collection without the evolvement of the system, the work and efficiency of each division became unsatisfactory.

Evolution of Tax System

Jean-Baptiste Colbert, French philosopher and Minister of Finance to King Louis XIV, once remarked that the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing. How taxes are collected and paid has changed a great deal since then. But governments still face the challenge of maximizing revenue collection while minimizing distortions. That is why every government in each country is looking for possible ways to achieve this goal and the first solution to think of is the evolution of system used in collecting tax and revenues.

Taxes have always been a policy instrument in many ways. But having a difficult economic environment such as the tension between the need to raise tax revenues and at the same time to provide a system which encourages economic activity is increasing. Governments need to raise revenues to carry their obligations and provide funding for infrastructure, education and public health. However, in a world which has now truly embraced globalization, some governments also see a need to put in place tax systems which are seen to be efficient, can help to attract investment, and in turn can help foster economic growth.

The Philippine government provided laws that will encourage local government to have a room for change in their systems. According to Section 130 in the Local

Government Code of 1991, each LGU shall, as far as applicable, evolve a progressive system of taxation. With the rapid technology advancements and new technology tools, upgraded collection of taxes and revenues system is possible. The Bureau of Local Government Development (BLGD) of the DILG, in its mandate to assist the LGUs in their local administration has developed systems that will enhance their capability in revenue generation.

The Bureau of Local Government Development (BLGD) of the Department of the Interior and Local Government (DILG) as mandated to enhance the technical, financial and administrative capabilities of local government units is into development of computer-based administrative systems under its Improved Local Operations thru eGovernance (ILOG) formerly Computerization of LGU Administrative Systems (CLAS) project. The Project, which had been categorized into three (3) subprojects, supports and facilitates LGUs administrative and planning operation for effective governance and public service. It is designed to help the LGUs enhance their capability to be able to satisfy the requirements of decentralization and local autonomy through the adoption of Information Technology (IT). It is a practical approach to data/information management in support to decision making, problem solving and seeking opportunities with the ultimate goal of effective public service delivery. The goal of the project is to develop and strengthen management capabilities of local government units in acquiring, handling, organizing, securing and disposing of relevant data for improved local government operations. Their objectives include developing/upgrading computer-based administrative systems for local governance operation; and to provide technical and consultancy services to LGUs on the establishments of administrative systems and procedures. The project has 3 subprojects which are:

ENHANCING LOCAL MANAGEMENT PROJECT (e-LMP)

The Enhancing Local Management Project (e-LMP) is designed for local government units with a view to further improve the delivery of basic services through information technology (IT). It is mean to facilitate the flow of information to all levels of

the organizational structure, hence, serving as the enabling mechanism for forecasting, decision-making, operational planning, monitoring, financial planning and manpower planning. It also therefore, allows the local chief executive and other interested parties to act accordingly based on the availability of timely, relevant and accurate information. The Local Government Code of 1991 envisions local government units to be selfreliant and effective partners in the attainment of national development. As such they should have programs, project, activities and services for the growth and the development of their constituents. To do so requires information. Therefore, data information are indispensable in sound decision-making.

The BLGD, on its part to assist LGUs promoting efficiency and effectiveness in its operation, developed two systems namely: Management Information System (MIS) and Personnel Management Information System (PMIS)

LEGISLATIVE TRACKING AND PERFORMANCE/MONITORING PROJECT (LTPMP)

The challenge to any local government unit (LGU) for the continuous improvement in the basic delivery of services compelled them to keep pace with the changing environment brought about by the digital economy.

The Sanggunian Council, as the legislative body of the local government unit, is mandated to enact ordinances, approve resolutions and appropriate funds for the general welfare of the local government unit and its inhabitants pursuant to Section 16 of the Code.

In view thereof, the Legislative Tracking and Performance Monitoring Project was designed to strengthen the capability of the Sanggunian Council to effectively discharge their duties through the adoption of information technology, focusing on Sanggunian Information System (SIS)

Intended beneficiaries in this project are the Sanggunian Council, LCEs & other Local Officials, Community, NGOs/POs/PS.

ENHANCING LOCAL REVENUE GENERATION PROJECT (e-LRGP)

The reduction of the Internal Revenue Allotment (IRA), erroneous tax assessment and collection system and the greater demands by the constituents for better services are some of the problems that faces our local government units today. These problems necessitates that government be creative in finding ways of increasing their revenue collection. Our government is faced with the challenged of maximizing societys contribution to the government with minimal efforts and resources. Innovative measures and radical changes have to be made to ensure effective monitoring of taxes for the good of the community. Thus, the need to correctly and efficiently assess, record, monitor and collect taxes is necessary. To address this optimization and efficiency, there is a need to leverage the use of Information Technology (IT) in tax processing and collection, the Bureau of Local Government Development (BLGD) of the DILG, in its mandate to assist the LGUs in their local administration has developed systems that will enhance their capability in revenue generation. The Enhancing Local Revenue Generating Project (e-LRGP) presents one of the solutions. The project has two (2) software solutions namely: Business Permits and Licensing System (BPLS) and Real Property Tax Assessment and Collection System (RPTACS) that were developed to primarily improve the business tax administration and collection system of the local government units and store business activities and real property related information that will be used for effective planning and management decision.

The last two systems under e-LRGP are being used presently by some of our local government unit. Even though these projects are implemented, Philippines, according to World Bank Group, take 193 hours to process taxes. These taxes include corporate, labor and consumption taxes. These indicate that our system in taxation is

not efficient enough compared to leading countries when it comes to processing taxes such as United Arab Emirates, Qatar and Saudi Arabia.

Aside from project launch by e-LRGP, other companies attempt to introduce systems that are designed for LGUs. Some are implemented in provinces and shows efficiency in the past years. The other system failed to do so because of technical requirements.

iTax (Integrated Taxation Management System)

An outdated manual system makes it difficult to track and collar delinquents or verify that the figures on paper match actual payments. This is a crippling situation for local governments, which receive an Internal Revenue Allotment (IRA) from the central government fixed at 40%. Local government units (LGUs) rely on the IRA for 92% of their revenues. If it needs more money, the local government must raise it itself.

An antiquated tax collection system has led to an over-reliance on grants, including presidential or congressional pork barrel. The results, like top-down

politicking, have been undesirable. In 2006, LGUs had a collection quota of 58% for Real Property Taxes, but collected only 20% to 35%.

In 2006, former Governor of Negros Oriental George P. Arnaiz, then Chairman of the Committee on Local Government of the House of Representatives, asked GIZ Decentralization Program Manager Dr. Herwig Mayer for help with its revenue woes. Dr. Mayer brought in Ernst-Dieter Fuchs, who identified the kinks: missing or poor collection systems; poor computer systems which were mostly isolated and not interlinked with different systems for different taxes; and unclear picture of the duties of a taxpayer. He presented a version of the tax collection system GIZ had developed for Tanzania in 1998. Called iTAX or Integrated Taxation Management System, this

flexible software system assists LGUs in the collection and payment of local levies. It

can also process nontax revenues (e.g., mayors permits, motorcycle operators permit and stickers) and receipts from economic activities (e.g., rentals and service charges).

The iTAX system could also be retooled to the specific needs of a town or municipality, and GIZ did just that for the iTAX pilot program in Negros Oriental. After a year-and-a-half of consultations and reconfiguring, it got off the ground. The results: a 4.6% increase in the collection of RPT in 19 municipalities and a 7.27% increase for the cities of Bayawan and Dumaguete.

A year later, the experiment was replicated in La Union.

The figures are

astonishing: from revenues of a little over P71 million in 2008, La Union collected over P132.5 million in 2009 (an 86.42% increase). In May 2010, La Union already collected more than P133 million, 86.49% more than what it has collected by the same month last year. The total RPT gross collection in 2009 had already been reached by May 2010.

After a year-and-a-half of consultations and reconfiguring, it got off the ground. The results: a 4.6 percent increase in the collection of RPT in 19 municipalities and a 7.27 percent increase for the cities of Bayawan and Dumaguete. A year later, the experiment was replicated in La Union. The figures are astonishing: from revenues of a little over P71 million in 2008, La Union collected over P132.5 million in 2009 (an 86.42 percent increase). By May 2010, La Union collected more than P133 million, 86.49 percent more than what it had collected by the same month last year. The total RPT gross collection in 2009 had already been reached by May 2010. In addition to increasing revenues, iTAX hopes to achieve more transparency on the way taxpayers act, says Juergen Seelmann, Senior IT Consultant of the iTAX Team. With it LGUs can generate automatic tax reminders. With an accurate map, LGUs can plan public projects better. It also tells local

governments how much tax they can expect to collect and how much delinquents owe.

iTAX allows LGUs to create local operating surplus or a balanced budget for them to improve their creditworthiness to banks and funding from the open market. Improved services resulting from better tax collection can generate confidence and stimulate local investments. Past attempts to introduce similar systems failed due to the cost of the equipment or the lack of sustained technical support. GIZ builds capacities to enable LGUs to eventually operate, maintain and upgrade the system independently.

The iTAX started in October 2005. GIZ-DP is anchored on the critical roles of LGUs to raise revenues through effective tax collection and initiate fair and transparent spending to address corruption and mismanagement of public funds. The programs work components involve support for LGU planning and budgeting; and local policy and local revenue administration with iTAX; policy development and dialogue at national and LGU level; support of local alliances; and strengthening LGU capacity development through provider networks. It can be configured to assist local governments in administering various types of local taxes aside from the real property tax; regulatory as well as administrative fees and charges such as permit fees, mayor's permit, civil registration, clearance; and receipts from the operation of economic enterprises and business. The Integrated Taxation Management (iTax) contains different modules that are integrated to optimize the collection and payment of taxes and fees in the government. It has the Business Permit and Licensing System where all transactions concerning business permit and licenses in a city or municipality are processed in this module. The BPLS module allows LGU to provide express services to taxpayers since it offers business related transactions such as business assessment, business renewals, collection and billing of tax to delinquent reminders, reports and outputs. Its Taxpayer module is designed to process taxpayer data entry. The module is labeled as the focal or main module since all activities within the system is centered on this module. Every task established and completed by each function is linked to the module, and vice versa. Other modules are Real Property, Water, Economic Enterprise, Payment, Maintenance, Report and Community Tax Certificate. Before, there are attempts to introduce similar systems but failed due to the cost of the equipment or the lack of sustained technical support. Since most of the modules are important for LGUs,

technical support will be a burden. The monetary requirements that are needed to sustain the operation of the project once GIZ-DP ends it support is to be considered. Another thing is the manpower requirement of the project. Technical people who will maintain the system will have to be hired and this requires huge sum of money. Overall, iTax is almost a complete system for collection of tax and non tax revenues. It may have good additional features but monetary and technical requirements can not be afford by other especially small municipalities.

iTax is almost the same with the Payment and Cashiering System since they are based on how LGU work for collecting taxes. The only difference is that iTax covers broad area such as planning and budgeting and economic enterprise. The researchers proposed system will use iTax as a model wherein there are different modules for each kind of taxes. And even though reports shows efficiency in the system used, World Bank Group eight years study ranked Philippines into 143 spot out of 185 countries as of 2013. This only proves that tax collection system here in our country still needs to be improved.

Another system designed for Philippine Local Government Unit is the RISE/LGU. RISE/LGU is a Local Government Unit software and system that provides Revenue Generating Information Systems, Financial Management Information Systems,

Governance and Administration Information System. It has Real Property Tax Assessment System (RPTAS / RPTA). RPTAS provides an automated system for assessing taxes due on real estate properties performed by the Assessor's office. It has facilities for property valuation based on market value as well as provides for appropriate adjustments. This module is linked to the RPTS module for the Treasurer's office for the billing and collection operations. Real Property Tax Billing System (RPTS) is the billing functions of the Treasurer's office for the assessed taxes due on real estate properties. It has facilities for producing billing notices/statements and monitoring of payments collected in the Revenue Collection System (RCS). The Business Permit and License System (BPLS) build and update the LGU's business/mayor's permit and establishment master files. It also builds up and maintains data on business permit-

related transactions which include: new applications and renewals of business permits, and closure of business establishments. Fund Management System (FMS) provides information by summary statistics on the status of disbursements being processed. Revenue Collection System (RCS) captures and maintains a database of all revenue collections and bank deposit transactions. It also generates the required standard reports on collections and deposits. Other modules are accounting, inventory, asset management, procurement, health care facilities, budget preparation and monitoring system. Its industry benefits are: designed and proven for Philippine Local Government Units, strategic and potent decision making, managing operations and governance, facilitates the proper formulation and execution of development plans, boosts revenues through efficient collection and monitoring systems, provides effective and efficient linkage of the provincial government with its municipal governmentt and barangay

units, delivers timely, relevant and accurate information, open system solution; locally developed and source code availability Compared to GIZ-DPs iTax, RISE/LGU is much more complicated because it does not only covers matters about taxes but also includes accounting, inventory, budget preparation and even health care facilities. It can provide relevant information to the management as well as help in making decisions. In Real tax property, assessment and billing are separated systems. The assessment is performed by the Assessors office and the billing is by the Treasurers office. This type of operation can be seen in Quezon and Caloocan City. It also contains the BPLS module. The same with iTax, they contain two important modules for tax and non tax revenue collection that can be integrated to work as one system. But technical and manpower requirement is still a problem because RISE/LGU contains 3 major systems that are complicated to manage.

The ten municipalities comprising the Province of South Cotabato are using a single property and business tax collection system after sealing a deal with Philippine Veterans Bank. Under the signed Memorandum of Agreement between the Provincial Government and Veterans Bank, the system will automate real property and business tax collections operations thereby enhancing the delivery of such services for the benefit

of each municipalitys residents & businesses. At the same time, this is foreseen to improve business & real property tax collections. As the Provincial Government of South Cotabato is also using the same tax collection system, this would mean seamless interface between each municipality and the Provincial Capitol. After one year of usage, there is only a little increase in their collections of real property tax and other non tax revenue. Compared to the 3 systems implemented like iTax, RISE/LGU and e-LRGP, the collection system adapted in South Cotabato show less efficiency. After one year iTax show big increase of collection in the pilots area that the collection system cannot. As governments continue to face short-term and long-term financial burdens, improving collections can be an important part of the solution. Rapid technology advancements and ever-evolving best practices offer significant opportunities for governments to recover outstanding receivables more effectively, and help mitigate economic challenges in their jurisdictions. The enumerated systems earlier are the governments way to enhance tax collection of local government units. But even though some system shows efficiency in their business operations and results, on a overall study for processing payments of tax collection, Philippines still have a slow processing. This scenario would like the researchers to grab as an opportunity to design and develop a new system that will eradicate the seen disadvantages in other system and adapt good features for Payment and Cashiering System for LGUs.

Related System

Since the proposed system is a Payment and Cashiering System, most related are payment, cashiering, disbursement, as well as billing system. There should be an access to the payment system to carry out the main task. Access to the payment system refers to the participants who are providing payment system services. The public, including major corporate entities, utilize these payment instruments and services. The services that the various participants provide in the payment system

include the issuance of payment instruments, collection of payment instructions and the provision of payment services to third persons, clearing and settlement. To increase the governments revenue, a system with efficient operation when it comes to accepting payment can help. The researchers look for some related systems that can help in determining qualities of a payment and cashiering systems. Their descriptions and features will be elaborated and relate it to the proposed system:

According to CGI Group, a company specializing Tax, Revenue and Collections Systems, Tax and revenue agencies are under constant pressure to find ways to maximize revenue and efficiency and improve constituent services. They realize that achieving these goals requires taking a strategic view of their enterprise. Success only comes with the alignment of all elements of an organization people, processes and technologywith an overall strategy. That is why for more than 25 years, CGI has helped tax, revenue and government collections clients transform their IT and business processes to achieve dramatic revenue increases in as little as 3-5 months after projects begin. CGI has worked with over 25 tax, revenue and customs clients in federal, state, provincial and local governments across the United States, Europe, Canada and Australia. These relationships, and the many former senior government tax and revenue officials who work at CGI, give a detailed, front-line understanding of client challenges. Their system and services include: Collections which is according to study an industryleading, web-enabled solutions for collections, recovery and decision management such as our market-leading collections case management system, CACS-G (Computer Assisted Collection System for Government) and Strata decision engine, both part of CGI's Collections360 for Government suite; Integrated tax in which innovative systems that support taxpayer identification and registration, returns processing and taxpayer and revenue accounting through modern service-oriented, data-driven architectures; A Fraud prevention and audit that broad experience in helping government detect underreporting, combat fraud and implement sophisticated, comprehensive audit solutions and Consulting which is a professional advisory services performed by true experts to

provide strategic vision and planning, operational assessments, business case development, business process renewal and change management.

Computer Assisted Collection System for Government (CACS-G) provides online access to all account information, and schedules, tracks and monitors the follow-up activities on accounts. It provides sophisticated collector performance and trend analysis reporting for more effective management of compliances operations. CACS-G efficiently manage compliance operations, delivering the following bottom-line results: Treat taxpayers consistently regardless of location or stage of delinquency, automatically assign accounts to collectors and to automated treatments when these can have a major effect, reduce work preparation time by automatically prioritizing accounts, reduce callbacks and time-consuming research by providing collectors with complete account information, reduce training time needed for new collectors through the use of scripts and easy-to-understand screen layouts and automatically monitor collection activities and collectors and collection groups.

CACS-G is also a tax collection system. The main advantage is that taxpayers can view their account information online. In this case, they can monitor their own payments and dues. Easy-to-understand layouts will also help employees to make their work faster. Even though the system automatically assigns accounts to collectors, it will be a big problem if it encounters technical problems. All systems experience such cases and relying too much on the system will put the organizations operation to stop. The researchers would like to adapt the main advantage of this system which is being online since systems implemented in the Philippines for LGU are not web based. The taxpayers can also view their account information as well as about other taxes and non revenue taxes process of payment.

The Payment and Cashier Services in University of Miami accepts online checking account and credit card payments, and the following is accepted at the Cashier's window: cash, checks, and money orders. The wire transfer of funds is also accepted. The system has free on-line checking account payments and is accepted

through the CaneLink system. Students must sign on to the CaneLink system to process payment. Once payment is processed, a confirmation email will be sent to the student's and proxy's email address noted in the University's database. The student's account will then be immediately updated with the payment. University of Miami also accepts on-line credit card tuition payments and payment by check or money order. In this system, students can check their accounts online and make payments in different modes such as cash, checks and online credit card. It will be convenient for the students in paying their tuition and does not need to go to the cashier window when paying through online credit card. It is related to the researchers proposed system because it also accepts payments and updates the account of the payer. The advantage of the system is its flexibility when it comes to mode of payment. As well as the cashier which not only accepts cash but also checks and money orders. The

proponents system will still maintain a cashier where taxpayers pay their dues. The cashiering system will be accepting cash and charge payments and returning change when appropriate. Computations such as fine for late payment and discounts will be covered also. TouchNet Bill+Payment let students, parents, and other authorized users the convenience of self-service access to online bills and bill payments. It helps to automate the Business Office by expanding student account systems to include web-based bill presentment, secure online payments and deposits, electronic disbursement of student refunds, and tuition payment plan setup and enrollment. The systems features include: Streamline Business Office operations and eliminate repetitive, inefficient processes where staff will be able to focus on those students and parents who need personal assistance the most; Provide online student self-service for bills and bill payment. Keep the business office open even when the lights are out. 24/7 access to campus bills, online bill payment, and payment plan enrollment result in reduced lines at the business office; Reduce paper costs by adopting electronic processes. Traditional paper billing and refunds consume excessive resources of paper, postage and time; Retain 100% of payment plan enrollment and late fees on campus. Manage tuition payment plans internally, collect money sooner with funds settled directly into customers bank account;

and meet or exceed student expectations. Send automatic notifications through email and text messaging and offer newer payment methods, such as online ATM (PINless) debit. It has four modules namely: Account Center where student account payments, with a real-time view of account information. It includes current account balance, recent activity, and estimated financial aid. Authorized third parties can make payments on students' behalf with optional access to limited account data. Stored payment profiles for both students and authorized third parties and scheduled payments on payerselected dates. The eSeries module refers to eBills, eDeposits, and eRefunds. Online bill presentment and payments; access to billing and bill payment history, plus automatic email and/or text message alerts. It process student deposits that do not reduce the student account balance until the appropriate release date. And make disbursement of financial aid and student refunds simple. Like payroll direct deposits, electronic disbursements are easy, safe, and reliable. Payment Plans module make payment plans automatic. It also makes payment plans self-service that create a wide variety of plans that meet the needs of a diverse student population. Then give students the convenience of online, self-service plan selection and enrollment. And the Payment Client module that secure, real-time, PCI compliant payments for ERP system applications. Just like other payment system, TouchNet provides service online for customers. The advantage of the system is the online payment where payers meet convenience. It encourages more and newer payment methods where payers can be notified through automatic notifications send to them. Even partial payment is catered. Together with the payment is the billing system. Payer can access the billing history and see how assessment is done. Online payment can be an advantage because of convenience but also can be a disadvantage because nowadays internet is prone to hackers. Online payment is sometimes prone to hackers. Safety of transaction cannot be ensured as well as electronic disbursement. The proposed system would like to overcome this disadvantage of TouchNet. Through researching and studying safe programming practices, researchers will make the system safe and well secured for online payment and online disbursement.

All the system cited that are implemented locally is based on Local Governments Units laws and regulations in collecting revenues. Each system has unique features promoted to enhance the collection of the government. The researchers found out that most of system based on LGU does have different modules for each kind of payment/taxes collected. Examples are the Real Property Tax and Business Process Licensing System. These two modules are always present and always a main feature. It is mainly because most cities rely too much on real property tax and non tax revenue. Real property tax computation and assessment is not an easy work that is why programmers and developers mainly focus on this module. Most disadvantages of the system are the technical and manpower requirement. Because of more added features, these systems require more high quality hardware and software requirements. Manpower is also a question because most people working in government do not have enough knowledge about computers technically except the I.T department.

Implementing these systems would require more hiring and training that needs a huge amount of money and time. On the other hand, related systems shows excellent features when it comes to payment. Online payment, newer method of payment and online access to information is seen as advantages for most company. Convenience of the customer and automatic features are also included. The common disadvantage of these systems is the security when it comes to payment. Most uses electronic payment which does not ensure the safety. As technology advances, more hackers find ways to penetrate payment systems. The result of all the research will be helpful in the design and development of the proposed system. The common advantages will be the backbone of the systems features. The disadvantages, as well as possible would like the researcher to improve and use as a gain to provide clients an effective and efficient system.