The future of tax

In recent years, tax administrators have begun shifting their focus from being regulatory and tax-collecting to becoming transformational. This trend has been further accelerated by the exigencies of the COVID-19 pandemic. Tax authorities have harnessed the latest advances in technology, taking major steps to strengthen their organization and enhance the taxpayer experience. Integrating digital into modernization programs, designing customer-centric services, and fine-tuning age-old policies are at the heart of this global digital transformation — with improving compliance the ultimate objective.

But the digital revolution is only one component of a multi-faceted tax ecosystem needed to drive much-needed transformational change.

Taxpayers, regulators, and tax practitioners have crucial roles to play to make the Philippine tax ecosystem more transparent, accountable, and vibrant.

With these goals in mind, SGV & Co. organized the 1st SGV Tax Symposium to bring in these stakeholders to share ideas, insights, and experiences that could help to further evolve our tax ecosystem. True dialogue, after all, starts from people coming together with a shared goal and common starting point.

Aligned with the firm’s purpose of nurturing leaders and enabling businesses for a better Philippines, SGV Tax articulates its vision towards a sustainable Philippine tax ecosystem, where taxpayers are knowledgeable on tax rules and willing to comply. A sustainable tax ecosystem starts from the taxpayers, who can help build a culture of ethics with better tax knowledge and appreciation of their social responsibility and commitment to nation-building by paying the correct taxes.

The importance of closely collaborating with regulators, who are business partners in achieving inclusive and resilient economic growth cannot be underestimated. When tax practitioners are armed with the necessary technical skills, while embracing the value of integrity, they foster an environment where taxpayers are compliant, employment soars, the Philippines becomes an investment haven for potential investors, and businesses flourish.

We all want to see a more evolved, advanced and effective tax system. We all understand the critical importance of taxation to national socio-economic development. We all want a system that is fair, equitable and progressive, one that is less complex and more value-adding.

At the SGV Tax Symposium, we shared the latest developments in taxation and the economy, in the hope of stimulating new conversations on where we want our tax system to go despite the many complex issues facing us today post-pandemic. Increasingly, tax is becoming the business and economic gamechanger in this period of recovery.

The role of tax is particularly important given the priorities of the new administration, as discussed by various government leaders during the SGV Tax Symposium.

National Economic and Development Authority Undersecretary Rosemarie G. Edillon kicked off the plenary sessions by discussing the recent economic performance and outlook, describing as the key to economic recovery the full reopening of the economy through well-crafted policies and programs. She also noted the risks to accelerated and sustained recovery, such as inflation, the fiscal deficit, and the slowdown in global demand.

Trade and Industry Undersecretary Rafaelita M. Aldaba discussed competitiveness, innovation, and the 2022 Strategic Investment Priority Plan, touting the recent liberalization reforms and the push to attract more investment in science, technology, and innovation. She said the Philippines is ready to embrace more investment that will bring in new technology, innovative processes, and disruptive business models.​ She also assured investors of a conducive innovation and business environment awaiting them.​

Representative Jose Ma. Clemente S. Salceda discussed the Department of Finance’s priority measures as well as the tax agenda that the House Committee on Ways and Means will focus on. He said Congress will study the feasibility of a 15% minimum tax on book income, address base erosion and profit-shifting through measures such as aggressive transfer pricing policies, and promote legislation that will allow the Philippines to gain a just share of global tax revenue.

Bureau of Internal Revenue (BIR) Commissioner Lilia C. Guillermo focused on the digital transformation of tax administration. She outlined the BIR’s path to its 2030 digitalization goals, which comprise four pillars: the strengthening of the BIR organization; the modernization of the BIR digital backbone; the enhancement of policies, governance, and standards; and the elevation of the taxpayer experience via innovative BIR services. There are specific projects for each pillar, but the majority of the positive feedback was on the BIR’s planned implementation of convenient, fast, and reliable online or digital transactions in the areas of registration, filing, payment, audit and enforcement.

Over the years, we have seen the progression of tax administration in the Philippines — from manual filing towards e-filing and e-payment and recently, increasing digital transformation. With the policy already laid down by both the BIR and the Department of Finance, supported by the Marcos administration, we expect to witness a rapid evolution of tax administration.

From level 1 of the digital tax administration life cycle, the government is moving towards levels 2 and 3 with the impending full roll-out of the e-invoicing or e-receipting system (EIS). Under Levels 2 and 3, the focus will be on the real-time reporting of data to drive compliance and collection where tax authorities will have direct access to company data. In some instances, the BIR may allow taxpayer information to be cross-referenced and shared across agencies to eventually allow for the electronic audit and assessment of taxpayers.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co. or EY.

EY ASEAN Tax leader Amarjeet Singh and EY Asia-Pacific Tax Leader Eng Ping Yeo, who both spoke virtually at the event, agreed that digital transformation is necessary and choosing the right operating model, partners, and systems is key on the road to transformational success. However, a tax administration cannot transform on its own. It needs to, among others,  build in significant time for consulting and engaging with taxpayers and the private sector.

The vital need for organizations to focus on digital transformation was further highlighted by executives from some of the major business groups, such as John C. Ong, Chief Financial Officer (CFO) of SM Prime Holdings; Rafael D. Consing, Jr., CFO of International Container Terminal Services, Inc.; and Dennis Anthony H. Uy, Chief Executive Officer of Converge ICT Solutions, Inc. They shared key insights into how their respective industries are gearing up as government embraces digital transformation.

In our relentless effort to see our purpose come to life, SGV Tax has collectively envisioned what this Future of Tax could be. It is our hope that the SGV Tax Symposium has inspired all those who participated to pursue greater work and success, all towards the aim of a better Philippines.

There is more work to be done as tax administration continues the shift to being transformational. More robust and involved discussions are expected in future SGV sessions.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co. or EY.

Fabian K. Delos Santos is the head of Tax of SGV & Co.