Interview: Protacio T. Tacandong
In what ways do you expect artificial intelligence (AI) and other digital tools to disrupt tax administration?
PROTACIO T. TACANDONG: In the age of digital disruption, every company must be able to respond to three major concerns: how to survive in this new environment, how to retool a labour force with the appropriate skills and how to capitalise on changes to tax law that make a locale more competitive for foreign direct investment (FDI). In order for a digital transformation process to succeed, corporations need a plan to understand the internet of things, advanced analytics and AI, among other digital capabilities, and execute in an agile manner. This has significant implications for the education of young people and the development of infrastructure required for the digital age. Intelligent automation will make some jobs obsolete, so we must develop a plan to upgrade the skills of the labour force, particularly to re-tool those workers at risk of being displaced.
Which digital tax administration mechanisms could increase investor interest in the Philippines?
TACANDONG: Digital transformation will improve the tax administration system. For example, the Bureau of Internal Revenue (BIR) will no longer have to interact face-to-face with taxpayers, and digital solutions will put an end to certain assessments that may sometimes be unreasonable for taxpayers. Moreover, these tools will both increase the accuracy of assessment and reduce the scope for corruption.
Local business taxation related to land titles is being digitalised. Similarly, the assessment and collection of personal income tax will improve thanks to digital tracking of transactions, which will increase value-added tax accountability, simplify the reporting of revenues and expenses, and hinder tax evasion. Furthermore, the long-term goal of using analytics and intelligent automation is to cross-match or cross-reference big volumes of tax data to enhance collection and compliance. The digitalisation of the tax system will also make the Philippines a more attractive destination for FDI, as reducing corruption and enhancing transparency will create a better ecosystem for investors. There will be no room for tax payment manoeuvring within the BIR, as their activity is overseen by the Foreign Corrupt Practices Act. A payment benchmark will also improve efficiency, with some companies aiming to stand out as premium payers by exceeding the minimum requirements, while other entities aim to meet them.
How can the Tax Reform for Attracting Better and High-Quality Opportunities aid small businesses?
TACANDONG: The Strategic Investment Priorities Plan (SIPP) defines how small and medium-sized enterprises (SMEs) can be nurtured while maintaining attractive conditions for FDI. There is a disparity among SMEs in terms of their growth and the generation of value added, which the new tax framework should ameliorate by encouraging the adoption of new technologies. The SIPP will also encourage SMEs to base their growth on offering complementary products and services to larger companies. The reduction of corporate income tax from 30% to 20% will benefit SMEs, and the one-person corporation framework has been simplified for individuals operating as corporations.
What are the implications of the Tax Amnesty Bill and the creation of a tax database for investors?
TACANDONG: The Tax Amnesty Bill will wipe the slate clean for taxpayers with unreported assets and liabilities. This initiative will encourage the declaration of assets that were kept in the dark and generate a revenue increase for the government that will likely reach P27bn-39bn ($502m-725m), thereby benefitting the national economy. Once the amnesty is completed, tax administration will be simplified. Moreover, an important part of the underground economy will be regularised, as taxpayers will be monitored to ensure that they report their revenues and expenses correctly.
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