An illustrative image of a person holding a credit card while shopping online on a computer. — PHOTO BY ARTUR WIDAK/NURPHOTO VIA REUTERS
By Jenina P. Ibanez, Senior Reporter
GOVERNMENT AGENCIES plan to tighten taxation and regulation of financial technology (fintech) companies as their business activities surge amid the pandemic, the Department of Finance (DoF) said.
The Bureau of Internal Revenue (BIR) and the Securities and Exchange Commission (SEC) are working together to evaluate how digital business models should be regulated and taxed, DoF said in a press release on Tuesday.
Amid efforts to broaden the tax base, Finance Secretary Carlos G. Dominguez III in a recent meeting directed the BIR and SEC to make sure that they have “enough regulatory and collection muscle for these digital technology companies.”
“Operating in the digital space is just a platform. The type of activity doesn’t matter. It’s still taxable by the BIR and subject to the appropriate regulations of the SEC,” he said.
The BIR plans to gather information that would help the agency identify fintech firms not explicitly covered by existing regulations.
The agency will create a team to evaluate the companies’ tax obligations based on categories identified by the SEC and the central bank, BIR Deputy Commissioner Marissa O. Cabreros said.
The BIR will also check existing large taxpayers that are “engaging in activities that are variations of existing businesses and validate if correct taxes are being paid.”
“We would, however, like to ask the National Economic and Development Authority (NEDA) to update Philippine Standard Industry Classifications (PSIC), to ensure that emerging fintech activities or entities are properly classified as a type of financial service provider, and to also include all the other new industries in the digital economy,” Ms. Cabreros said.
The BIR has already been identifying companies that have not registered to guide them in complying with tax rules.
For its part, SEC plans to come up with fintech specific requirements for licensing and data security, SEC Chairman Emilio B. Aquino said.
Mr. Dominguez said the SEC should strengthen its new PhilFintech Innovation Office, where these firms apply for registration, by hiring young employees with digital skills. The SEC should add more to its budget for fintech-related programs, he added.
The SEC had launched the new office in July to create policies and provide regulatory guidance for fintech companies.
Sought for comment, PayMaya founder and Chief Executive Officer Orlando B. Vea said the company supports regulations that strengthen the fintech industry.
“Fintech is a powerful tool for the country’s inclusive growth and it can only flourish in an atmosphere of trust and progressive governance,” he said in an e-mailed statement.
Angelito M. Villanueva, chairman of Fintech Alliance.ph, said that the organization recognizes regulators’ mandate in evaluating tax obligations and requirements. More focused implementation of the rules can help make sure that fintech clients are protected from digital fraud, he added.
“The Alliance is more than willing to collaborate with our regulators on drawing up specific measures to safeguard our end-users. This is the very purpose of the establishment of the SEC’s PhilFintech Innovation office which the Alliance actively supports. With better capacity building and synergy, fintech players are also empowered to implement better fraud management systems,” he said in a Viber message.
“In the end, the least Alliance members can do is to protect consumers and clients, and to maintain the trust the public has invested in us.” Moody’s Investors Service in July said fintech companies in the Philippines could threaten the dominance of traditional banks, especially in remittances and lending. More Filipinos started using digital payment services amid mobility restrictions declared to curb the spread of the coronavirus disease 2019.