THE Philippine Dealing System Holdings Corp. (PDS) will launch the country’s first digital corporate bond in February to deepen local capital markets, the Department of Finance (DoF) said.

The issuance will use distributed ledger technology, where transactions are recorded in several sites instead of a centralized database.

Philippine Dealing and Exchange Corp. (PDEx) President and Chief Executive Officer Antonio A. Nakpil said PDS is working with a Singapore-based financial technology company to roll out the digital registry backed by the distributed ledger technology.

“The PDS is aiming to conduct an end-to-end test of the digital registry and depository with market participants by January this year and is targeting its possible live launch with an issuance of a digital bond by late February,” he said.

Mr. Nakpil said the digitalization roadmap for the corporate bond market includes the use of distributed ledger technology, which will be integrated with the PDS online platform.

The platform, or the electronic securities portal (e-SIP), was launched for the primary market last year.

The e-SIP allows the online submission of documents required for PDEx listing and Philippine Depository and Trust Corp. registry services for initial public offerings for corporate bonds.

After the Ayala Land, Inc. pilot last year, in which the company offered its four-year P10-billion bond, four more issuers have onboarded securities and client investors through the online portal.

PDS last month said it was preparing cybersecurity measures as it rolls out its online platform for the secondary market.

Finance Secretary Carlos G. Dominguez III said he supports these digitalization initiatives to deepen the country’s capital markets. But he also expressed concern about hackers.

“I’m telling you this type of digitalization is probably going to be a target for hackers and scammers, and just plain thieves,” he said.

Mr. Nakpil said the PDS is assessing the vulnerability of its systems to potential threats.

The PDS is working with the Bankers’ Association of the Philippines and National Association of Securities Broker Salesman, Inc. to use e-SIP to standardize processes for customers.

“This initiative looks to do away with a tedious process for investors to keep filling up the same forms several times when buying corporate bonds from different brokers,” DoF said. — Jenina P. Ibañez

By Jenina P. Ibañez, Senior Reporter

THE PHILIPPINE government must move its tax collection processes online to cut costs and improve compliance among individuals and businesses, the Asian Development Bank (ADB) said.

ADB Southeast Asia economist Aekapol Chongvilaivan said such reforms will help improve tax revenue collections.

“Our recent report on tax reforms in Southeast Asia emphasizes the need to shift from manual paper-based systems to digital systems to reduce the costs of tax administration and compliance for individuals and corporates,” he said in an e-mail.

In a report A Comprehensive Assessment of Tax Capacity in Southeast Asia, the ADB said a narrow tax base in the region is attributed to its large informal sector.

In the Philippines, economic activities outside the tax systems make up 28% of the gross domestic product.

“There are various reasons for a large informal economy — such as weak tax enforcement, inefficiencies of tax administration, and tax avoidance behaviors among others,” the report said.

The high costs of tax compliance, ADB added, discourages small- and medium-sized businesses from complying with the rules.

“In the context of the Southeast Asian countries, there is a huge opportunity for tax authorities to leverage on tax administration measures that aim to reduce costs of compliance and promote voluntary compliance by simplifying tax registration.”

The report suggested that digital taxation can help governments quickly improve revenues without changing existing rules.

Mr. Chongvilaivan, the co-author of the report, said the Bureau of Internal Revenue’s (BIR) digital initiatives have helped address issues in tax administration and payments.

The ADB is helping the BIR to develop taxpayer online registration and data management, he said.

“(The system) would help enrich taxpayers’ services, thereby reducing their compliance costs and bringing them into tax systems.”

Finance Secretary Carlos G. Dominguez III has said that local government units should digitalize their tax processes after a Supreme Court ruling expanded their share of National Government revenues starting this year.

Mr. Dominguez said local governments will have to develop electronic business registration and renewal as well as local tax and fee assessment and collection.

Both national and local governments should improve revenue generation to make the country’s fiscal resources last during the coronavirus disease 2019 (COVID-19) pandemic, he said.

In December, the Finance chief said that nearly 100% of annual income tax returns were filed online last year, higher than the 90% in 2020 as more Filipinos use digital tools for transactions.

Only 10% of taxpayers filed taxes digitally in 2015, he said.

Co-authored by ADB Taxation Administration Expert Annette Chooi, the report released in December said digital technology will cut transaction costs and improve tax transparency.

“Following the use and adoption of electronic services or e-services, such as e-filing and e-payment, many Southeast Asian countries see an increase in tax collection.”