The Asian Development Bank (ADB) has approved a $400 million loan to support the Philippines' revenue mobilization efforts including modernizing tax administration, systems and processes.

In a statement yesterday, the ADB said the Domestic Resource Mobilization (DRM) Subprogram 1 is the multilateral lender's first policy-based loan dedicated to DRM reform.

According to the ADB, the loan is expected to help the country achieve its medium-term fiscal strategy.

This, as the policy-based loan would help tackle discrepancies in tax policy frameworks to boost tax compliance, reduce tax avoidance, and raise more revenues from activities and products with 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,' ADB senior economist for Public Finance Aekapol Chongvilaivan said.

'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,' he said further.

Under the PDP, the Philippines aims to raise its tax-to-GDP ratio to 15.9 percent of GDP by 2026, to bring it closer to the 17.6 percent average ratio of its neighbors in Asia and the Pacific.

In line with the DRM program, the government is pursuing the Bureau of Internal Revenue's digital transformation initiative, which aims to modernize key taxpayers' services, including online tax registration, return filing, and payment.

The project is expected to help increase the ratio of actual tax revenues to tax potential to at least 85 percent by 2026 from 75 percent in 2020.

Earlier this month, the Philippines joined the Organization for Economic Cooperation and Development (OECD)/G20 Inclusive Framework on Base Erosion and Profit Shifting, a move that shows the government's commitment to global tax standards and progressive tax reforms.

ADB said it has been working with the Philippines on DRM through policy dialogue and consulting services.

It said it supports the government's real property valuation and assessment reform to strengthen the property valuation functions and modernize real property taxation.

The ADB has also provided technical advice in the formulation of the country's Comprehensive Tax Reform Program packages.

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