Digital security, infrastructure to make digital economy effective

MANILA, Philippines — Addressing data security concerns and infrastructure woes will ensure that capturing the digital economy into the country’s tax system is effective, according to the Asian Development Bank Institute (ADBI).

Tokyo-based ADBI, the multilateral lender’s think tank, said economies in Asia-Pacific should not ignore the huge potential of the digital economy.

The height of the lockdowns last year made e-commerce stronger than ever as many people depended on online deliveries to ensure that health protocols are being followed, it said.

The Department of Finance and the Bureau of Internal Revenue already said they would focus on developing a tax regime that would allow the government to collect value-added tax on digital transactions, whether they are local or cross-border.

House Bill 6765 or the digital economy taxation bill also seeks to impose taxes on streaming sites and other digital services, which have not been on the BIR’s list of taxpayers.

While taxing digital services will help boost the country’s revenue generation in a post-pandemic world, doing so requires fixing the loopholes to ensure that the digital economy will be beneficial to all.

ADBI said addressing concerns over data security is especially relevant for tax administration as government agencies may gather and store personal information on a large scale, potentially becoming a prime target for hackers.

“Data security is closely linked with governance – corruption and the exchange of favors among public officials could also endanger personal data security. Such actions could further jeopardize the public’s trust in the administration and make the digitalization of tax administration less effective,” ADBI said.

It also said countries should take advantage of developments in artificial intelligence, robotics, blockchain, and big data to secure better outcomes for governments and taxpayers.

Further, the think tank argued that there is a need to develop digital infrastructure to ensure high-quality and equitable services.

In the Philippines, digital infrastructure challenges related to internet availability, affordability, quality and reliance remain an issue.

In fact, the Philippines ranks low in the region in terms of internet speed. Also, only around 18 percent of Filipino households have their own internet access at home and some 10 percent of barangays are still without cellular phone signals.

Worse, there are still five percent of households that do not have electricity at home while efforts to install free public Wi-Fi in barangays have a long way to go as only 13 percent have internet connections.

“The framework and infrastructure should address social inclusion, such as digital literacy and access to digital services for low-income households and the elderly,” ADBI said.

“Quality information and communications technology infrastructure and the adoption of technology are critical for transformation and for reducing the gap between rural and urban levels of development,” it said.

“Including digital business and online transactions in tax frameworks will undoubtedly increase the tax base and provide additional revenue for governments,” it said.