PHL needs to move tax collection processes online, says ADB report
By Jenina P. Ibañez, Senior Reporter
THE PHILIPPINE government must move its tax collection processes online to cut costs and improve compliance among individuals and businesses, the Asian Development Bank (ADB) said.
ADB Southeast Asia economist Aekapol Chongvilaivan said such reforms will help improve tax revenue collections.
“Our recent report on tax reforms in Southeast Asia emphasizes the need to shift from manual paper-based systems to digital systems to reduce the costs of tax administration and compliance for individuals and corporates,” he said in an e-mail.
In a report A Comprehensive Assessment of Tax Capacity in Southeast Asia, the ADB said a narrow tax base in the region is attributed to its large informal sector.
In the Philippines, economic activities outside the tax systems make up 28% of the gross domestic product.
“There are various reasons for a large informal economy — such as weak tax enforcement, inefficiencies of tax administration, and tax avoidance behaviors among others,” the report said.
The high costs of tax compliance, ADB added, discourages small- and medium-sized businesses from complying with the rules.
“In the context of the Southeast Asian countries, there is a huge opportunity for tax authorities to leverage on tax administration measures that aim to reduce costs of compliance and promote voluntary compliance by simplifying tax registration.”
The report suggested that digital taxation can help governments quickly improve revenues without changing existing rules.
Mr. Chongvilaivan, the co-author of the report, said the Bureau of Internal Revenue’s (BIR) digital initiatives have helped address issues in tax administration and payments.
The ADB is helping the BIR to develop taxpayer online registration and data management, he said.
“(The system) would help enrich taxpayers’ services, thereby reducing their compliance costs and bringing them into tax systems.”
Finance Secretary Carlos G. Dominguez III has said that local government units should digitalize their tax processes after a Supreme Court ruling expanded their share of National Government revenues starting this year.
Mr. Dominguez said local governments will have to develop electronic business registration and renewal as well as local tax and fee assessment and collection.
Both national and local governments should improve revenue generation to make the country’s fiscal resources last during the coronavirus disease 2019 (COVID-19) pandemic, he said.
In December, the Finance chief said that nearly 100% of annual income tax returns were filed online last year, higher than the 90% in 2020 as more Filipinos use digital tools for transactions.
Only 10% of taxpayers filed taxes digitally in 2015, he said.
Co-authored by ADB Taxation Administration Expert Annette Chooi, the report released in December said digital technology will cut transaction costs and improve tax transparency.
“Following the use and adoption of electronic services or e-services, such as e-filing and e-payment, many Southeast Asian countries see an increase in tax collection.”
