ADB recommends modernization for tax administration

Posted on July 13, 2011

THE PHILIPPINES along with its Asian neighbors should address tax evasion to increase revenue collection, the Asian Development Bank (ADB) said as part of its recommendations to reform tax administration.

The ADB publication entitled “Taxation in Asia” cited the Philippines as third in Asia with the highest shadow economy (43.4% of the gross national product), next to Thailand (52.6%) and Sri Lanka (44.6%). This means that a huge portion of the Filipino population and businesses do not pay taxes.

“Too little tax revenue can make it difficult for governments to spend adequately in critical areas for economic growth, including public infrastructure and investment in human capital creation through education and health services,” the report said.

“Complicated tax systems subject to many moving parts encourages corruption and drive taxpayers to go underground,” House committee on ways and means chairman Hermilando I. Mandanas said in a text message.

To address this, the ADB said tax administration should be modernized to improve revenue and compliance.

This means highly automated information technology systems should be in place to streamline registration, audit and taxpayer education, among others.

“The effectiveness of tax enforcement and voluntary compliance depend critically on the perception that evaders are likely to be caught and if so, punished,” the paper read. ADB recommended increasing penalties for tax cheating and publicizing tax evasion conviction in the media.

The services of the tax administration can be improved by becoming more consumer-friendly, following the service paradigm by promoting taxpayer education, improving tax agency Web sites, simplifying taxes, tax forms and using mass media to reinforce tax compliance as the social norm, ADB said.

Finance Undersecretary Gil S. Beltran said “tax administration is the focus of the agency now. Everything is being improved from taxpayer registration to tax audit to filing of cases.” -- NMG