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Interview: Protacio T. Tacandong
In what ways do you expect artificial intelligence (AI) and other digital tools to disrupt tax administration?
T. TACANDONG PROMOTION: In the age of digital disruption, every company must be able to answer three main problems: how to survive in this new environment, how to re-equip the workforce with the right skills and how to take advantage of changes in tax laws that make a locale more competitive for foreign direct investment (FDI). For the 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 the infrastructure needed for the digital age. Smart automation will make some jobs obsolete, so we need to develop a plan to upskill the workforce, especially to reskill those workers at risk of displacement.
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 end certain assessments that can sometimes be unreasonable for taxpayers. In addition, these tools will increase the accuracy of assessment and reduce opportunities for corruption.
Local business taxation related to land ownership is being digitized. Likewise, the assessment and collection of personal income tax will improve thanks to digital transaction tracking, which will increase VAT accountability, simplify income and expenditure reporting and prevent tax evasion. Additionally, the long-term goal of using analytics and intelligent automation is to cross-match or cross-match large volumes of tax data to improve collection and compliance. Digitizing the tax system will also make the Philippines a more attractive destination for FDI, as reducing corruption and increasing transparency will create a better ecosystem for investors. There will be no room for maneuvering the payment of taxes within the OLP, as their activities are controlled by the Foreign Corrupt Practices Act. The payment metric will also improve efficiency, with some companies seeking to stand out as premium payers by going above and beyond the minimum requirements, while other entities strive to meet them.
How can tax reform to attract better, high-quality opportunities help small businesses?
TACANDONG: The Strategic Investment Priorities Plan (SIPP) sets out how small and medium-sized enterprises (SMEs) can be nurtured while maintaining an attractive environment for FDI. There is a mismatch between SMEs in terms of their growth and generation of added value, which the new tax framework should improve 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 in corporate income tax from 30% to 20% will benefit SMEs, and the sole proprietorship framework is 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 out the bottom for taxpayers with unreported assets and liabilities. This initiative will encourage the declaration of assets that have been kept under wraps and generate an increase in revenue for the government that is likely to reach P27bn-39bn ($502m-725m), thereby benefiting the national economy. Once the amnesty ends, tax administration will be simplified. In addition, an important part of the underground economy will be legalized, as taxpayers will be monitored to ensure that they report their income and expenses correctly.
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