The current buzzword in tax is digital transformation. The business sector is well aware that riding the digital wave is necessary and inevitable. Companies that can leverage and successfully implement digital transformation — if they have not yet done so — have the distinct opportunity to seize new growth opportunities ahead of competitors and smoothly transition as government rolls out digital innovation initiatives.
At the 1st SGV Tax Symposium organized by SGV & Co. and held on Aug. 19, digital innovation and business transformation were widely discussed by guest speakers and panelists, in alignment with the main theme, The Future of Tax.
One of the highlights of the symposium was the presentation of BIR Commissioner Lilia C. Guillermo, which zeroed in on digital transformation in tax administration.
Ms. Guillermo centered on the BIR’s 2030 digitalization vision, which is composed of four pillars: the strengthening of the BIR organization; modernizing the BIR digital backbone; enhancing policies, governance, and standards; and elevating taxpayer experience and innovating BIR services. In her presentation, she said digitalization is not a one-person show, but a long and deliberate process in which all stakeholders must be fully engaged.
The BIR’s digital transformation program aims to transform the BIR into a data-driven organization through a digitally empowered and resilient workforce utilizing reliable, scalable, and robust digital technologies and infrastructure to innovate BIR services and elevate taxpayer experiences.
During the Conversation with C-Suites session, which was moderated by SGV Tax Head Fabian K. delos Santos, executives from the logistics; information and communications technology (ICT); and property development and retail sectors emphasized that businesses must keep pace with the ever-changing digital landscape and prepare to harness the benefits of a truly digital economy.
International Container Terminal Services, Inc. Chief Financial Officer (CFO) Rafael D. Consing, Jr., Converge ICT Solutions, Inc. Chief Executive Officer Dennis Anthony H. Uy, and SM Prime Holdings, Inc. CFO John Nai Peng C. Ong all acknowledged the paramount need for companies to equip themselves with the necessary tools to be ready for the digitalized mode of tax administration and enforcement.
As the Department of Finance and Bureau of Internal Revenue are poised to adopt the electronic invoicing system (EIS), taxpayers — particularly those who have been selected to participate in the pilot program — must have readied their infrastructure for the EIS implementation.
Mr. Consing said e-invoicing is a breakthrough project that is aligned with ICTSI’s own digital initiatives. The logistics company was among the early preparers, recognizing the benefits of digitalizing a portion of its finance function, mainly since it operates in various jurisdictions.
E-invoicing could bring about ease of compliance for the private sector and at the same time, real-time monitoring on the part of the BIR. Compliance with the invoicing requirements for those seeking refund claims will also largely gain from electronic receipting.
Mr. Uy, meanwhile, stressed the important role that the ICT sector will play in the government’s digital transformation.
The digital infrastructure must be established to pave the way for wider broadband penetration and improved speed quality. Without a mature digital framework, full implementation of any digital endeavor may prove to be challenging.
The discussion also delved into recent legislative changes that have had a major impact on business and are expected to foster a more vibrant economy.
Mr. Ong said the passage of Republic Act 11032 or the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, is lauded by the property sector, especially companies like SM Prime, which is engaged in nationwide mall operations and real estate development. Permit filings and securing of licenses were made more convenient, principally in areas where government agencies have set up satellite offices in malls.
He cited other developments that will drum up more economic activity in the short- to medium-term, such as the liberalization of the Retail Trade Law and the harmonization of tax incentives under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, including the publication of the Strategic Investments Priority Plan, which includes the establishment of smart cities.
The retail sector, he said, will likely take advantage of the trade liberalization rules allowing foreigners to set up shop in the Philippines with lower investment requirements. The more relaxed rules are expected to encourage more direct investments into the malls. Mr. Ong added that smart cities can bring about progressive developments envisioned under the current administration’s socioeconomic agenda.
ICTSI’s Mr. Consing said industries heavily immersed in science, technology, engineering, and mathematics should still be encouraged to sustain the country’s growth.
Digitalization can also provide previously considered sunset industries with a new lease on life. Online selling, for instance, grew by leaps and bounds during the pandemic. Giving this sector access to digital infrastructure allowed it to electronically market and sell products, which was previously not widely available.
All these economic activities will result in more taxable revenues and the corresponding taxes collected can be funneled back into the economy.
While the digital shift may face challenges in areas where manual procedures have been the norm, executives are confident that these are only temporary. They, however, cautioned that there is a need for strong regulations to prevent any technological abuse.
Even the BIR recognizes that true and lasting transformation will not be achieved overnight. Among the first steps that must be taken is to learn and build the capabilities of BIR examiners and personnel using a specialized BIR learning platform. The BIR wants to train and introduce its personnel to the industry’s best practices, including analytics and systems development, the establishment of a cybersecurity framework, enterprise architecture, advanced data warehouse solutions, and project management methodologies.
Indeed, it will still take time before full digital compliance and monitoring will be the rule more than an exception. But both the public and private sectors need to gear up to ride the digital wave, which may be the only way to successfully navigate the business world in the foreseeable future.
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 EY or SGV & Co.
Cecille S. Visto is a tax senior director and lead manager for the Entity Compliance and Governance Services of SGV & Co.