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Dominguez: BIR, BOC Pursuing Reforms to Plug Tax Leakages, Increase Revenues

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Image Source: The Balance

The Bureaus of Internal Revenue (BIR) and of Customs (BOC) are currently pursuing reforms in tax administration, including the use of an Internal Revenue Stamps Integrated System (IRSIS) for both cigarettes and alcohol products, to plug leakages and increase revenue collections, according to the Department of Finance (DOF).

DOF Secretary Carlos Dominguez III said reforms such as the IRSIS will complement the proposed Tax Reform for Acceleration and Inclusion Act (TRAIN) or House Bill No. 5636, which the Duterte administration is urging the Congress to pass swiftly in order to provide the government a steady revenue flow that will help fund its inclusive growth agenda of cutting poverty incidence to 14 percent by 2022 and transforming the country into a high-middle income economy by that time.

In Tuesday’s hearing by the House ways and means committee chaired by Rep. Dakila Carlo Cua, Dominguez also took the opportunity to thank the members of the House of Representatives for their overwhelming support for TRAIN, which this chamber passed by a 246-9 vote last May 31.

Cua was the principal author of the Department of Finance (DOF)-endorsed HB 4774, the original version of TRAIN that was consolidated with 54 other related measures into HB 5636.

Dominguez said that on top of tax policy reforms such as the TRAIN bill, the executive branch is implementing on its end improvements in tax administration “to optimize revenue collections and plug the leakages in the system that have cost our government tens of billions of pesos in foregone revenues each year.”

At the start of the hearing, Deputy Speaker Romero Quimbo commended Dominguez for taking time out “from his hectic schedule” to attend the hearings of the committee.

I just want to put on record that the Secretary has always been coming over to the House of Representatives, recognizing the process here. We really appreciate your presence and for as well recognizing it [despite] the hectic schedule you have,” Quimbo said.

Cua said he “share[s] the same sentiment,” and also thanked Dominguez for his presence at the hearing.

These improvements include the affixing of Internal Revenue Stamps on imported and locally manufactured cigarettes and the implementation of IRSIS to curb smuggling in the cigarette industry.

But following the implementation of IRSIS, the government noticed the emergence of fake stamps and took steps to stop its proliferation.

Among the steps taken by the government are the planned revisions to the stamp design and the installation of closed circuit CCTV monitoring systems by cigarette manufacturers inside their factories and warehouses so that BIR personnel could monitor their operations, Dominguez said.

BIR Assistant Commissioner Teresita Angeles said at the hearing that the new cigarette tax stamps will be out by October.

Dominguez likewise recalled that four months ago, he called the attention of e-commerce giant Alibaba regarding its online listings advertising the sale of digitally printed fake cigarette stamps.

The Alibaba Group acted swiftly on our request for them to take down these listings and assured us that it will continue to exercise vigilance in screening its platforms to weed out these illicit advertisements,” he said.

The finance chief also said the BIR and BOC are now closely working together and sharing intelligence information on possible tax evasion schemes perpetrated by erring companies.

Dominguez said the IRSIS will also be implemented for alcohol products, with the BIR already signing a memorandum of agreement with the APO Production Unit for the printing of the stamps.

He said that besides implementing IRSIS, the DOF is also “bringing in all the powers of modern information technology to make electronic governance real and ensure a sustainable fiscal position” and “continuously fighting red tape and taking steps to improve our economy’s competitiveness.”

Our nation today is fiscally secure in the face of global and domestic challenges. Several factors have contributed to this stable fiscal status. Among them is our improved revenue collections, which, in the first 10 months of the Duterte administration reached P2.09 trillion,” Dominguez said.

He said this figure is seven percent higher than the same period in the previous year. “For this, credit should go to the administrative reforms in our main revenue agencies, the BIR and the Bureau of Customs, that have substantially improved our revenue effort.(DOF)

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Economy

Improving Access And Financial Literacy Are Key To Financial Inclusion In PH—PIDS Study

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Image Source: pidswebs.pids.gov.ph

Improving financial literacy and broadening access to financial institutions like banks and insurance companies, especially in the rural areas, are key to achieving financial inclusion in the country.

This was according to a study by state think tank Philippine Institute for Development Studies (PIDS) on factors affecting financial inclusion in the Philippines. The research showed that more educated individuals living in urban areas, wherein most financial institutions like banks are situated, are more likely to have savings and insurance than their less educated counterparts in the rural areas.

The World Bank defines financial inclusion as a situation where people and businesses have access to useful and affordable financial products and services that meet their needs. Financial products and services include payments, savings, credit, and insurance.

Authors Gilberto Llanto and Maureen Ane Rosellon, PIDS president and research associate, respectively, emphasized that access to finance allows the poor to accumulate assets like savings and insurance to protect them from potential risks and shocks, and to invest in income-generating activities.

However, access to financial products and services remains a big challenge in the Philippines as shown in the latest data of the Bangko Sentral ng Pilipinas(BSP). According to BSP, only about 43 percent of Filipino adults have bank savings while 72 percent of those who borrow, transact with informal financial institutions. Also, only about 30 percent of small and medium enterprises have formal lines of credit and/or bank loans.

One of the main factors that limits people’s access to formal financial institutions, according to Llanto and Rosellon, is their remote location in the rural areas. “For example, data on bank network vis-à-vis population on a regional level indicate a great difference between urban areas like the National Capital Region (ARMM) and highly rural regions like the Autonomous Region of Muslim Mindanao (ARMM),” they explained. Citing statistics from BSP, they noted that the number of banks per 10,000 adults in the NCR is estimated at 3.6 in 2010 and 2015 compared to only one bank per 100,000 adults in ARMM for the same period.

“Due to the absence of banks, people would usually just keep their money at home or join informal group savings in the community, such as rotating savings and credit associations locally called “paluwagan”, the authors concluded.

Also, data from BSP show that majority of adults (about 70%) find pawnshops as the nearest and easiest to reach among financial products and service providers. Likewise, nonstock savings and loan associations, payment centers, and remittance agents take the shortest time to reach at 17 to 18 minutes. The cost of a round-trip travel to these establishments is also the lowest, at PHP 31 to PHP 37.

Llanto and Rosellon said the first step to encourage people to access banks and other formal financial institutions is to improve people’s education. “A higher level of education increases the likelihood of saving and borrowing from a formal financial institution. Educational attainment can be an indicator of the knowledge and level of understanding of credit options and opportunities, and confidence to apply for a loan,” they pointed out.

Furthermore, the authors highlighted the importance of looking at potential barriers to access, which includes, among others, cost or proximity to providers of financial services.

Meanwhile, banks have recently introduced electronic banking (e-banking) to the market as a proper response to global innovations in banking. According to the study, e-banking has started to penetrate “unbanked” markets. Still, poor people in far-flung areas are unable to access this technology as it requires suitable electronic devices and strong Internet connection.

“Although mobile financial services have taken a foothold in the financial markets, the majority of retail transactions by individuals and businesses in the Philippines are still done in cash,” the authors stated. They cited a 2015 report by Better Than Cash Alliance showing that only 1 percent of the 2.5 billion retail payments per month in the country were done electronically.

This press release is based on the PIDS discussion paper titled “What Determines Financial Inclusion in the Philippines? Evidence from a National Baseline Survey”.

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BSP Sees 3.4-4% Inflation for January

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Higher oil and commodity prices are seen as upside risks for Philippines’ inflation rate in January 2018 and bring the rate between 3.5 and four percent.

In a statement, the central bank said its Department of Economic Research considered the impact of higher fuel prices overseas and weather-related disturbances in the country as factors that would push up prices.

“In addition, higher excise taxes on fuel, sugar sweetened beverages with the implementation of the TRAIN (Tax Reform for Acceleration and Inclusion) this month, would lead to additional upward price pressures,” it said, referring to the first package of the tax reform program that is being implemented starting Jan. 1 this year.

“The increase in prices could be partly offset by lower electricity rates in Meralco-serviced areas for the month,” it added.

The government has a two to four percent inflation target for 2017-19.

Last year, inflation averaged at 3.2 percent, higher than year-ago’s 1.8 percent rate but still within the government’s target range.

Last December alone, inflation was flat at 3.3 percent but higher than year-ago’s 2.6 percent.

Philippine monetary officials forecast this year’s inflation to average at 3.4 percent.

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Improving Access and Financial Literacy Are Key to Financial Inclusion in PH—PIDS Study

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Image Source: lawyer24h.net

Improving financial literacy and broadening access to financial institutions like banks and insurance companies, especially in the rural areas, are key to achieving financial inclusion in the country.

This was according to a study by state think tank Philippine Institute for Development Studies (PIDS) on factors affecting financial inclusion in the Philippines. The research showed that more educated individuals living in urban areas, wherein most financial institutions like banks are situated, are more likely to have savings and insurance than their less educated counterparts in the rural areas.

The World Bank defines financial inclusion as a situation where people and businesses have access to useful and affordable financial products and services that meet their needs. Financial products and services include payments, savings, credit, and insurance.

Authors Gilberto Llanto and Maureen Ane Rosellon, PIDS president and research associate, respectively, emphasized that access to finance allows the poor to accumulate assets like savings and insurance to protect them from potential risks and shocks, and to invest in income-generating activities.

However, access to financial products and services remains a big challenge in the Philippines as shown in the latest data of the Bangko Sentral ng Pilipinas(BSP). According to BSP, only about 43 percent of Filipino adults have bank savings while 72 percent of those who borrow, transact with informal financial institutions. Also, only about 30 percent of small and medium enterprises have formal lines of credit and/or bank loans.

One of the main factors that limits people’s access to formal financial institutions, according to Llanto and Rosellon, is their remote location in the rural areas.

“For example, data on bank network vis-à-vis population on a regional level indicate a great difference between urban areas like the National Capital Region (ARMM) and highly rural regions like the Autonomous Region of Muslim Mindanao (ARMM),” they explained.

Citing statistics from BSP, they noted that the number of banks per 10,000 adults in the NCR is estimated at 3.6 in 2010 and 2015 compared to only one bank per 100,000 adults in ARMM for the same period.

“Due to the absence of banks, people would usually just keep their money at home or join informal group savings in the community, such as rotating savings and credit associations locally called “paluwagan”, the authors concluded.

Also, data from BSP show that majority of adults (about 70%) find pawnshops as the nearest and easiest to reach among financial products and service providers. Likewise, nonstock savings and loan associations, payment centers, and remittance agents take the shortest time to reach at 17 to 18 minutes. The cost of a round-trip travel to these establishments is also the lowest, at Php 31 to Php 37.

Llanto and Rosellon said the first step to encourage people to access banks and other formal financial institutions is to improve people’s education. “A higher level of education increases the likelihood of saving and borrowing from a formal financial institution. Educational attainment can be an indicator of the knowledge and level of understanding of credit options and opportunities, and confidence to apply for a loan,” they pointed out.

Furthermore, the authors highlighted the importance of looking at potential barriers to access, which includes, among others, cost or proximity to providers of financial services.

Meanwhile, banks have recently introduced electronic banking (e-banking) to the market as a proper response to global innovations in banking. According to the study, e-banking has started to penetrate “unbanked” markets. Still, poor people in far-flung areas are unable to access this technology as it requires suitable electronic devices and strong Internet connection.

“Although mobile financial services have taken a foothold in the financial markets, the majority of retail transactions by individuals and businesses in the Philippines are still done in cash,” the authors stated.

They cited a 2015 report by Better Than Cash Alliance showing that only 1 percent of the 2.5 billion retail payments per month in the country were done electronically.

www.pids.gov.ph

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BMI Research Forecasts Sustained 6% Level Growth for Philippines

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Image Source: gamned.com

The research subsidiary of Fitch Group projects the sustained robust expansion of the Philippine economy on back of the government’s infrastructure program, favorable demographics and increased trade with China.

BMI Research eyes a 6.3 percent growth in 2018 and 6.2 percent in 2019 – – levels that the research entity considers “respectable.

These are lower than the 6.7 percent output, as measured by gross domestic product (GPD), that the economy posted in 2017.

“We emphasize that the 6+% GDP expansion is still strong by regional and historical standards and this will be supported by positive demographic trends, a strong public infrastructure drive, and deepening economic cooperation with China,” the study said.

However, BMI Research cited as risk to growth the deteriorating business environment, citing that the seven percent growth in the third quarter of 2017 will “unlikely to continue as leading financial market indicators were showing signs of fatigue while the business environment has been deteriorating.”

This deterioration, it said, is expected to hamper further improvement on private sector investment in the next quarters.

It noted that growth of fixed capital formation declined to 10.3 percent in 2017 from year-ago’s 25.2 percent, with construction rising only by 5.7 percent from 2016’s 15.1 percent and durable equipment by 12.2 percent from year-ago’s 34.5 percent.

Amidst these risks, BMI Research remains optimistic on the domestic economy’s growth, which is expected to get additional lift from the tax reform program, the first package of which is for implementation starting January this year.

Package 1 of the Tax Reform for Acceleration and Inclusion (TRAIN) law cuts personal income tax in the country, making workers’ first Php250,000 annual income tax free. Impact of this on government revenues will be countered by excise tax hikes on fuel and sugar-sweetened beverages, among others.

The first tax reform package is estimated to generate around Php82.3 billion additional revenues for this year alone, and this, the study said, is a plus on the government’s program to increase infrastructure investment.

“This will likely go some way in improving the country’s poor infrastructure, which has long prevented the Philippines from reaching its growth potential,” it added.

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