Partnership for a new tax system to promote investment, job creation and poverty reduction – Manila Bulletin

By South Korean Ambassador to the Philippines Kim Inchul

AMBASSADOR KIM INCHUL (left) with Undersecretaries for Finance Mark Dennis Joven (center) and Antonette C. Tionko (right).

The widely acclaimed Tax Reform for Acceleration and Inclusion (TRAIN) Act was signed into law in December 2017. The law includes several tax reform measures that must be implemented within five years of its enactment, such as the requirement for large-scale taxpayers and businesses that export and e-commerce to digitally issue invoices and receipts and digitally report their sales data to BIR. The launch of the electronic invoicing system (EIS) will mark the start of the full implementation of the TRAIN law. The BIR data center for EIS, the first step in the partnership between the Korean and Philippine governments for the implementation of the TRAIN law, will be operational on July 1st.

Since Secretary of Finance Carlos G. Dominguez offered Korea cooperation to introduce EIS in February 2018, the two governments have been working together for a digital tax administration system suitable for the Philippines. This EIS partnership represents an important milestone in our three-decade development partnership in light of the profound and lasting ramifications it is expected to have on the Philippine economy.

First, the digital e-invoicing platform will enable BIR to expand its VAT revenue base and collect more revenue. Since Korea installed the e-invoicing system in 2010, its VAT revenue has increased by 42%, from US$41.3 billion at the time to US$58.5 billion in 2019. The collection VAT in the Philippines in 2030 could reach more than 600 billion pesos. Tax revenues can help fund major infrastructure projects and other important economic development projects. These projects will help create more jobs and promote foreign investment in the Philippines.

Second, the Digital Invoice Reporting System will guide Philippine businesses to reduce tax compliance costs by streamlining and digitizing tax documentation processes. Electronic invoices have several advantages over paper invoices. They are less prone to errors, prevent fraud and reduce processing costs. The Philippines’ average tax compliance time per year in 2018 was 171 hours. The introduction of EIS will reduce the time to about 80 hours per year, which is close to that of Singapore in 2018. Since the introduction of the electronic invoicing system in 2010, Korea has generated about 782.6 million dollars a year through tax compliance. cost reduction.

It should also be noted that according to the World Bank’s Doing Business 2020 report, high tax compliance costs are associated with larger informal sectors, more corruption and less investment. The World Bank report clearly shows that the e-tax administration system has a lower level of perceived public sector corruption. EIS will eliminate the physical exchange of cash, which can reduce rent seeking and ultimately improve the business environment. This is why more and more economies are rapidly turning to adopting the e-tax administration system. According to the same Doing Business 2020 report, the number of economies with an online tax platform has more than doubled over the past 15 years, from 43 in 2006 to 106 in 2020. Today, the Philippines is the spearheading this global trend among ASEAN members.

These ElS-induced changes will be the solid foundation for stronger economic growth. The modernization of economic systems and financial processes through digitalization is a proven driver for promoting economic activity and efficiency. It will undoubtedly be a most useful tool to better meet the challenges posed by a post-pandemic global economy.

The Korean government, through the Korea Export Import (KEXIM) Bank Economic Development Cooperation Fund, will continue its partnership with the Philippines to expand EIS coverage nationwide, from the top 100 companies the most important ones covered by the pilot phase to all one million businesses.

We are proud to be trusted partners in achieving the letter and spirit of the TRAIN Act which should be a foundational law to make the Philippine tax system more fair and transparent and in doing so achieve marco -economic such as investment promotion, job creation and ultimately poverty reduction.

AMBASSADOR KIM INCHUL (left) with Undersecretaries for Finance Mark Dennis Joven (center) and Antonette C. Tionko (right).

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