Philippines : Strengthening Tax and Fiscal Policy Capacity for Inclusive Growth

Sovereign Project | 50331-001

The proposed technical assistance (TA) supports the Department of Finance (DOF) of the Philippines to develop sound tax and fiscal policy through policy-oriented analysis and communication of fiscal and economic policy priorities with stakeholders.

The TA will support the development of the strategy, economics, and results group''s (SERG) policy and advisory role and, in particular, enhance SERG''s capacity under the DOF. To develop sound tax and fiscal policy through policy-oriented analysis and communicating fiscal and economic policy priorities with stakeholders, SERG requires ADB''s support in (i) providing technical advice on the design of priority reforms, (ii) enhancing quantitative and qualitative analytical research skills for policy reform, (iii) communicating policy reform agenda and research outputs to stakeholders; and (iv) tax administration capacity strengthened.

Project Details

  • Project Officer
    Chongvilaivan, Aekapol
    Sectors Group
    Request for information
  • Country/Economy
    Philippines
  • Modality
  • Sector
    • Public sector management
Project Name Strengthening Tax and Fiscal Policy Capacity for Inclusive Growth
Project Number 50331-001
Country / Economy Philippines
Project Status Active
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 9250-PHI: Strengthening Tax and Fiscal Policy Capacity for Inclusive Growth
Technical Assistance Special Fund US$ 2.00 million
TA 9250-PHI: Strengthening Tax and Fiscal Policy Capacity for Inclusive Growth (Supplementary)
Technical Assistance Special Fund US$ 1.00 million
TA 9250-PHI: Strengthening Tax and Fiscal Policy Capacity for Inclusive Growth
Technical Assistance Special Fund US$ 800,000.00
Strategic Agendas Inclusive economic growth
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Knowledge solutions
Private sector development
Sector / Subsector

Public sector management / Economic affairs management - Public expenditure and fiscal management

Gender Some gender elements
Description

The proposed technical assistance (TA) supports the Department of Finance (DOF) of the Philippines to develop sound tax and fiscal policy through policy-oriented analysis and communication of fiscal and economic policy priorities with stakeholders.

The TA will support the development of the strategy, economics, and results group''s (SERG) policy and advisory role and, in particular, enhance SERG''s capacity under the DOF. To develop sound tax and fiscal policy through policy-oriented analysis and communicating fiscal and economic policy priorities with stakeholders, SERG requires ADB''s support in (i) providing technical advice on the design of priority reforms, (ii) enhancing quantitative and qualitative analytical research skills for policy reform, (iii) communicating policy reform agenda and research outputs to stakeholders; and (iv) tax administration capacity strengthened.

Project Rationale and Linkage to Country/Regional Strategy

Public spending levels on public services such as infrastructure, education, and health are critically dependent on sufficient tax revenues, fiscal space, and adequate budget execution. Low government spending on basic infrastructure and social services, either because of low tax or slow budget execution, causes poor economic and social outcomes and a higher burden for the populationespecially those in low-income groupswho must spend for what the government should have provided. According to the Global Competitiveness Report 2015-2016, tax regulations complexity was ranked fourth among the most problematic factors for doing business, and tax rates were ranked fifth, following inefficient bureaucracy (first), inadequate infrastructure (second), and corruption (third). This implies limited tax capacity, coupled with the lack of indexation and tax rationalization, is a factor in constraining the country''s competitiveness and further growth. More effective tax and fiscal policy reforms such as an expanded tax base are needed to support government expenditure conducive to poverty reduction programs and inclusive growth while maintaining public spending and debt at sustainable levels.

To meet the ever-increasing demand for investment in infrastructure and social services, the Ten-Point Socioeconomic Agenda rolled out by the current government identified tax reform to institute a more progressive, equitable, efficient, and simple tax system among its policy priorities. It also underscored the need to make the tax system competitive relative to neighboring countries. Tax measures being proposed to Congress include (i) lower individual and corporate income taxes, (ii) expansion of value-added tax base, (iii) indexation of oil excise tax to inflation, and (iv) rationalization of fiscal incentives to investors. Other tax measures being considered pertain to reforming property taxes and imposing taxes on luxury goods (e.g., automobiles, yachts, and jewelry) and sugary products. On the fiscal policy, the government is expected to increase infrastructure investment to 7.0% of GDP by 2022, raising the budget deficit to 3.0% of GDP from the 2015 level of 0.9% while mobilizing additional revenues to finance increased spending. To develop the tax package and further fiscal consolidation measures, rigorous economic and welfare analysis is needed. This will provide an evidence-based case for the tax reform package and planned fiscal policy. There is also a need for stakeholders to understand the impacts of implementing the government-proposed tax measures. The analysis will help ensure tax reform and fiscal policy are effective, objective, and pro-poor, ultimately ushering in investment, job generation, poverty reduction, and inclusive growth.

Recognizing the need for careful, yet determined, policy-making and implementation, the DOF has proposed the creation of the SERG, a full-time delivery group within the DOF reporting directly to the secretary of finance and concurrently chair of the Cabinet Economic Development Cluster (CEDC), which, in turn, reports to the cabinet members and Presidential Management Staff. The SERG is mandated to provide strategic advice on tax, fiscal policy, and other priority reforms; conduct policy analysis to support the case for these reforms; and manage or coordinate these reforms to improve the standard of living in the country, especially for the poor and marginalized. As a tax and fiscal policy unit dedicated to the CEDC, the SERG will enable the government to take decisive actions that are timely, of high quality, and evidence based, and to effectively and objectively communicate the reform and policy with stakeholders. Therefore, the establishment of SERG is the DOF''s critical step to facilitate the government's planned tax reform and fiscal policy as well as other socioeconomic agenda.

Impact

Tax revenues increased to 15.6% of GDP

Project Outcome
Description of Outcome

SERG capacity for tax and fiscal policy to recommend policies and reforms strengthened

Progress Toward Outcome

The TA helped the DOF achieve an important milestone on 19 December 2017 when the Republic Act 10963, also dubbed as 'TRAIN Package 1 , was signed into law by President Rodrigo Duterte. Among the measures included in TRAIN Package 1 are: (i) lowering individual income tax rates; (ii) broadening the base of the value-added tax (VAT); and (iii) increasing excise taxes on oil products, automobiles, and sugar-sweetened beverages. The first year of the tax law implementation in 2018 witnessed additional tax revenues amounting to $3.47 billion (PhP180 billion)equivalent to an increase of the tax revenue-to-GDP ratio by more than 1.0% to 15.3% in 2018 from 14.2% in 2017.

Implementation Progress
Description of Project Outputs

Technical advice on the design of priority reforms provided

Quantitative and qualitative research skills for policy reform enhanced

Policy reform agenda and research outputs communicated with/circulated to key stakeholders

Status of Implementation Progress (Outputs, Activities, and Issues)

Under outputs 1 and 3, a wide array of specialized experts on tax laws, tax and fiscal policies, tax administration, public opinion surveys, and public communications were mobilized in response to the DOF's needs for technical advice for preparation of the Tax Reform for Acceleration and Inclusion (TRAIN) under the CTRP.

Under output 2, the TA, through support of tax-related training courses for DOF's permanent staff, as well as procurement of IT equipment and statistical software, has led to institutionalization of tax and fiscal policy capacity within the DOF. On 28 June 2017, President Duterte signed the Executive Order 31 to create the SERG of the DOF. It is mandated to provide strategic advice on tax and fiscal policies in support of the administration's socio-economic reform agenda focused on sustaining high growth, eradicating extreme poverty, and growing the economy to upper middle-income status by 2022. SERG is assigned to craft the CTRP bills and coordinate closely with the Congress in finetuning this reform proposal, including fiscal implications of the government's priority programs.

Update as of 30 March 2020

Under output 1, 44 specialized experts on tax policies and public communications were mobilized in response to the DOF's needs for technical advice for crafting the Tax Reform for Acceleration and Inclusion (TRAIN). The support of legal, technical, and communication experts has led to the passage of Packages 1A and 1B of the CTRP and helped the DOF design and craft the remaining packages. For the remaining packages of CTRP, the TA mobilized experts to conduct: (i) in-depth, sector-specific studies on major recipients of tax incentives to support the corporate income tax reform (Package 2); (ii) assessment of the various economic and financial impacts of real property tax reform (Package 3) under the Valuation Reform Act (VRA); and (iii) a comprehensive policy review of the Philippines' passive income taxation and the draft bill of passive income tax reform (Package 4). The TA also provided strategic expert advice to develop the DOF's engagement and policy advocacy strategy for passage of the remaining packages.

Under output 2, the capacity of the DOF to formulate tax and fiscal policy was institutionalized. The TA helped the DOF organize tax policy-related training courses and bilateral consultations with international organizations and foreign governments for DOF's permanent staff and government officials from relevant agencies, including procurement of information technology (IT) equipment and statistical software. On 28 June 2017, President Duterte signed Executive Order 31 to create the SERG of the DOF. SERG is mandated to provide strategic advice on tax and fiscal policies in support of the administration's socio-economic reform agenda. This agenda focuses on sustaining high growth, eradicating extreme poverty, and growing the economy to upper middle-income status by 2022.

Under output 3, the TA helps the DOF communicate the CTRP with stakeholders and the public clearly and effectively, while building reform coalitions to generate support in the legislative process. Two communications firms were engaged to: (i) develop social media strategies to inform and engage the public on the tax reform proposals; (ii) prepare and implement concepts and branding for social media engagement; and (iii) conduct opinion surveys to help the DOF better assess and understand the sentiments of the general public towards the tax reform.

Under output 4, the TA strengthened tax administration capacity of the DOF and its attached agencies such as the Bureau of Internal Revenue (BIR). Three business process review and IT experts were mobilized to undertake a review of business processes for tax administration and business registration, and research on implementation of standardized deadline for government transactions, zero-contact policy and single unified business registration forms. The deliverables under this output have served the DOF as a groundwork for the BIR's digital transformation initiatives, especially the Online Registration and Update System (ORUS). The DOF envisages ORUS to be a comprehensive taxpayer-oriented system to enable taxpayers to access their own data, including tax filing and payment records, which BIR has and will eventually integrate with the existing e-filing and e-payment systems.

Geographical Location Nation-wide
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Responsible ADB Officer Chongvilaivan, Aekapol
Responsible ADB Department Sectors Group
Responsible ADB Division Public Sector Management and Governance Sector Office (SG-PSMG)
Executing Agencies
Department of Finance
Timetable
Concept Clearance 23 Nov 2016
Fact Finding 06 Oct 2016 to 11 Nov 2016
MRM -
Approval 29 Nov 2016
Last Review Mission -
Last PDS Update 30 Sep 2020

TA 9250-PHI

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
29 Nov 2016 16 Dec 2016 16 Dec 2016 31 Dec 2019 31 Dec 2023 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
3,800,000.00 0.00 0.00 0.00 0.00 0.00 3,800,000.00 21 Nov 2023 2,834,649.57

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

The Access to Information Policy (AIP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.

The Accountability Mechanism provides a forum where people adversely affected by ADB-assisted projects can voice and seek solutions to their problems and report alleged noncompliance of ADB's operational policies and procedures.

In preparing any country program or strategy, financing any project, or by making any designation of, or reference to, a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

Title Document Type Document Date
Strengthening Tax and Fiscal Policy Capacity for Inclusive Growth: Technical Assistance Report Technical Assistance Reports Nov 2016

Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

None currently available.


Evaluation Documents See also: Independent Evaluation

None currently available.


Related Publications

None currently available.


The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

Requests for information may also be directed to the InfoUnit.

Tenders

Tender Title Type Status Posting Date Deadline
National IT Systems Engineer Individual - Consulting Closed
National Business Analyst Individual - Consulting Closed
National IT Solutions Architect Individual - Consulting Closed
Strengthening Tax and Fiscal Policy Capacity for Inclusive Growth - National Consulting Firm for the Expanded Online Registration and Update System (eORUS) Firm - Consulting Closed
Strengthening Tax and Fiscal Policy Capacity for Inclusive Growth - National Consulting Firm for Enhancement of Electronic Forms Firm - Consulting Closed
Strengthening Tax and Fiscal Policy Capacity for Inclusive Growth - National Application Program Interface (API) Web Services Developer Individual - Consulting Closed
Strengthening Tax and Fiscal Policy Capacity for Inclusive Growth - National Application Program Interface (API) Architect Individual - Consulting Closed
Strengthening Tax and Fiscal Policy Capacity for Inclusive Growth - National Application Program Interface (API) Database Developer Individual - Consulting Closed
Data Analytics Firm - Consulting Closed
Strengthening Tax and Fiscal Policy Capacity for Inclusive Growth - National Senior Business Process Expert Individual - Consulting Closed
Strengthening Tax and Fiscal Policy Capacity for Inclusive Growth (National Senior Business Process Expert - Training & Capacity Building for DX Program) Individual - Consulting Closed
National Communication Strategy and Engagement Assistant Individual - Consulting Closed
Strengthening Tax and Fiscal Policy Capacity for Inclusive Growth - National Economist III (COVID-19) Individual - Consulting Closed
National Legislative and Legal Expert Individual - Consulting Closed
National Senor Business Process expert (FIRB, ORUS, and DX Support) Individual - Consulting Closed
National Senor Business Process expert (Training and Capacity Building for DX) Individual - Consulting Closed
Local Public Finance Management Expert Individual - Consulting Closed
National Data Scientist Individual - Consulting Closed
National Economist (II) Individual - Consulting Closed
Economist Individual - Consulting Closed
National Senior Business Process Review expert (Registration) Individual - Consulting Closed
National Lead Business Process Review expert Individual - Consulting Closed
National Communications & Engagement Expert Individual - Consulting Closed
National Communications Strategy Expert Individual - Consulting Closed
National Knowledge Products Expert Individual - Consulting Closed
National Economist Individual - Consulting Closed
Public Relations Expert (BLGF) Individual - Consulting Closed
Real Property Expert Individual - Consulting Closed
Strategic Engagement Consultant Individual - Consulting Closed
Property Taxes Expert Individual - Consulting Closed
Property Valuation Expert Individual - Consulting Closed
Tax Law and Accounting Adviser Individual - Consulting Closed
Assistant Tax Legal Researcher Individual - Consulting Closed
Research Project Coordinator Individual - Consulting Closed
Economist Individual - Consulting Closed
Tax Legislation Researcher Individual - Consulting Closed
Information Technology Systems Project Manager Individual - Consulting Closed
Government Liaison Coordinator Individual - Consulting Closed
Process Management and Information Technology Expert Individual - Consulting Closed
Economist Individual - Consulting Closed
Policy Communications Coordinator Individual - Consulting Closed
Research Project Assistant Individual - Consulting Closed
Tax Legal Research Coordinator (Capital Gains & Financial Intermediaries) Individual - Consulting Closed
Lead Tax and Legal Expert Individual - Consulting Closed
Fiscal Policy and Financial Economics Expert Individual - Consulting Closed
Tax Legal Research Coordinator Individual - Consulting Closed
Econometrician Individual - Consulting Closed
Cash Transfer Expert Individual - Consulting Closed
Civil Society Coordinator Individual - Consulting Closed
Media Coordinator Individual - Consulting Closed
Researcher Individual - Consulting Closed
Government Networker Individual - Consulting Closed

Contracts Awarded

Contract Title Approval Number Contract Date Contractor | Address Executing Agency Total Contract Amount (US$) Contract Amount Financed by ADB (US$)
Policy and Advisory Technical Assistance Technical Assistance 9250 24 Aug 2022 SYCIP, GORRES, VELAYO & CO. (PHILIPPINES) | SGV BUILDING, 6760 AYALA AVENUE MAKATI, METRO MANILA, PHILIPPINES Department of Finance 374,964.00
Policy and Advisory Technical Assistance Technical Assistance 9250 31 Aug 2022 SYCIP, GORRES, VELAYO & CO. (PHILIPPINES) | SGV BUILDING, 6760 AYALA AVENUE MAKATI, METRO MANILA, PHILIPPINES Department of Finance 449,997.00
Policy and Advisory Technical Assistance Technical Assistance 9250 08 Jun 2022 Senti Techlabs, Inc. (PHILIPPINES) | Unit 702 20th Drive Corporate Center, 20th Drive Street, Bonifacio Global City Taguig City, Metro Manila, Philippines Department of Finance 199,153.00
Policy and Advisory Technical Assistance 9250 04 Apr 2017 Philippine Survey And Research Center, Inc.(Philippines) | 10/F Omm-Citra Bldg., San Miguel Ave., O Ter Pasig, Philippines, Ncr 1605 Philipp Ministry of Road and Transportation 133,225.00
Policy and Advisory Technical Assistance 9250 28 Mar 2017 LouderPH, Inc. (Philippines) | 017 Upper Ground Floor,, Worldwide Corpo R, Shaw Blvd,, Barangay Highway Hills Ma Metro Manila 1550 Philippines Department of Finance 119,192.00
Policy and Advisory Technical Assistance 9250 04 Apr 2017 Philippine Survey and Research Center, Inc. (Philippines) | 10/F OMM-Citra Bldg., San Miguel Ave., Ortigas Center, Pasig, Philippines, NCR 1605, Philippines Department of Finance 133,225.00

Procurement Plan

None currently available.