ADB to support DOF’s core enhanced tax collection strategy using digitalization

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The Asian Development Bank (ADB) will provide support for Department of Finance (DOF) Secretary Ralph G. Recto’s core enhanced tax collection strategy of using digital technologies for a more efficient and aggressive tax administration.

The statement came after Secretary Recto emphasized, during a meeting with ADB senior officials, the need to have more unified inter-agency coordination among national and local agencies to harmonize records of registered taxpayers and optimize tax collection efficiency.

The move is in line with President Ferdinand R. Marcos, Jr.’s directive under Executive Order (EO) No. 170 mandating government agencies to adopt digital payment systems for government disbursements and collections.

The ADB supports the Philippines’ continued efforts in creating a fair and efficient tax system that fosters inclusive and resilient economic growth through the USD 400-million Domestic Resource Mobilization policy-based loan.

The policy-based loan focuses on enhancing domestic resource mobilization policies and legal frameworks; modernizing tax administration through digital transformation; and strengthening international tax cooperation and exchange of information. A second subprogram is pipelined for 2025.

Moreover, the Bank is supporting the Bureau of Internal Revenue (BIR) in its digitalization efforts through technical assistance that prepares an investment project in 2025.

The ADB affirmed its commitment to likewise strengthen cooperation with the Philippine government on infrastructure modernization, particularly on public-private partnerships (PPPs).

The ADB said it will continue to work on supporting the government in delivering more effective and innovative infrastructure projects through the Infrastructure Preparation and Innovation Facility (IPIF).

The IPIF is a technical assistance loan provided by the ADB to support initiatives of the Department of Transportation (DOTr) and the Department of Public Works and Highways (DPWH) in preparing, implementing, and managing public infrastructure investments.

Both sides also agreed to work on developing pipeline projects and programs, particularly in green infrastructure and clean energy, under the USD 10 billion climate financing commitment of the ADB for the period 2024 to 2029.

Meanwhile, Secretary Recto informed the ADB of the Philippine government’s aggressive efforts to attract foreign and domestic investments, acknowledging their crucial role in creating quality jobs for Filipinos and stimulating economic growth.

On the part of the DOF, Secretary Recto highlighted that it is currently amending the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act to tailor-fit the interests of investors in strategic investments.

The Finance Chief also said the DOF is pushing for the passage of its refined tax reform measures to boost revenue generation.

These reforms include the imposition of excise tax on single-use plastics (SUPs), the rationalization of the mining fiscal regime, the imposition of value-added tax on digital service providers (DSPs), the Passive Income and Financial Intermediary Taxation Act (PIFITA), and the Motor Vehicle Road User’s Tax (MVRUT).

The ADB expressed its willingness to extend support for the said reform proposals, noting that it has previously extended technical assistance to the Department on developing sound tax and fiscal policies.

As of September 30, 2023, the ADB is the Philippines’ second-largest official development assistance (ODA) partner with a total commitment of USD 9.67 billion, accounting for 28 percent of the total ODA share.

For the period 2010 to 2023, the ADB has made available to the Philippines an average of USD 1.64 billion in loan financing annually.

Other ADB officials present during the meeting were Vice President for Operations in East and Southeast Asia and the Pacific Scott Morris; Southeast Asia Department Director General Winfried Wicklein; Southeast Asia Department Deputy Director General Emma Veve; Philippine Country Office Director Pavit Ramachandran; and Southeast Asia Department Director Jose Antonio Tan III.

Joining Secretary Recto were Chief-of-Staff and Undersecretary Alu Dorotan Tiuseco; Undersecretary Maria Edita Z. Tan; OIC Assistant Secretary Jenaira Jalasco; and Assistant Secretary Juvy C. Danofrata.