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Sunday, December 22, 2024

PH gets $400-m loan from ADB to raise revenues

The Asian Development Bank (ADB) said Tuesday it approved a $400 million (P22.4 billion) loan to help the Philippines achieve its medium-term fiscal strategy and finance its post-pandemic economic recovery through a stronger focus on revenue mobilization, including modernizing tax administration, systems and processes.

It said the Domestic Resource Mobilization (DRM) Program Subprogram 1 is the bank’s first policy-based loan dedicated to DRM reform.

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It aims to address the country’s need to tackle discrepancies in tax policy frameworks to boost tax compliance, reduce tax avoidance and raise more revenues from activities and products that have a major impact on the environment or contribute to climate change.

“The program recognizes that DRM reforms necessitate not only raising revenue, but also designing a revenue system that fosters inclusiveness, encourages good governance, promotes investments and job creation, reduces inequality, and tackles climate change,” said ADB senior economist for public finance Aekapol Chongvilaivan in a statement.

“ADB supports the government’s DRM program, which will result in a higher tax-to-gross domestic product [GDP] ratio and ensure sustainable financing for the country as it sets out to achieve its goals under the Philippine Development Plan [PDP] 2023‒2028,” Chongvilaivan said.

The Philippines wants to raise its tax-to-GDP ratio from 15.0 percent of GDP in 2020 to at least 15.9 percent by 2026, as stated in the PDP 2023–2028, to slowly narrow the gap with the 17.6 percent average ratio of its Asia and Pacific neighbors.

Among the reforms pursued by the government in line with the DRM program is the Digital Transformation Initiative of the Bureau of Internal Revenue.

The project aims to modernize key taxpayers’ services, including online tax registration, return filing and payment. This can potentially increase the ratio of actual tax revenues to tax potential, from 75 percent in 2020 to at least 85 percent by 2026, according to the ADB.

The DRM Program helped the government implement various international tax standards under the Organization for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on Base Erosion and Profit Shifting and the Global Forum on Transparency and Exchange of Information to address international tax avoidance.

The Philippines this month joined the OECD/G20 Inclusive Framework, committing to global tax standards and progressive tax reforms that will make the country more conducive to private sector development and foreign investment.

ADB said it has been engaging with the Philippines on DRM through policy dialog, consulting services and knowledge work.

The bank is supporting the government’s Real Property Valuation and Assessment Reform to strengthen its property valuation functions and modernize real property taxation, which accounts for 30 percent of local government units’ own-source revenues.

It also provided technical advice in the formulation of the Comprehensive Tax Reform Program packages since 2016.

ADB said it is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.

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