By Cai Ordinario, May 22 2019; Business Mirror
Image Credit to Business World
Small businesses will soon have nowhere to hide from the taxman as the government intends to utilize satellite technology to run after all tax cheats, according to a report released by the Tokyo-based Asian Development Bank Institute (ADBI).
In a report, titled “Fintech for Asian SMEs,” ADB Financial Analyst Naoko Nemoto and ADBI Dean Naoyuki Yoshino said the Department of Finance (DOF) plans to use satellite data to appraise underreported taxes of small and medium enterprises (SMEs).
It can be noted that the country’s tax effort was still languishing at below 15 percent. Data from the DOF showed that in the first quarter of 2019, the country’s tax effort improved to 14.6 percent from 14.3 percent in the same period in 2018.
“Rapid technological developments have dramatically increased the available data sources and now provide various parties with the opportunities to leverage data in their activities,” Yoshino said in a related blog published on Tuesday.
“For instance, the secretary of finance in the Philippines plans to leverage satellite data to estimate underreported SMEs’ revenue and collect tax fairly,” he pointed out.
ADBI said satellite technology could be tapped to spot any underreporting in revenues and taxes through their visitors. The satellite data can be used to come up with the average spending of each diner.
However, ADBI said using satellite technology could also help monitor the growth of crops, as well as the number of trucks entering and leaving farms nationwide.
ADBI added that new technology and big data can improve the efficiency of financial institutions in responding to the needs of SMEs, particularly where credit is concerned.
It added that the establishment of fintech firms can help encourage competition in financing and enable SMEs to obtain better financing for their needs.
“Accumulated digital data can complement the limited data disclosed by SMEs and reduce the cost of information asymmetries,” Yoshino said. “New technology and big data can also be employed to reduce the cost of information asymmetry between the financial sector and SMEs.”
Using fintech, ADBI said, could help SMEs, which play a crucial role in growing Asian economies. The ADBI estimated that SMEs account for no less than 40 percent of employment and no less than 30 percent of Asian economies.
In the Philippines, SMEs account for 63.7 percent of employment and 35.7 percent of the economy. Other Asian countries like Indonesia saw SMEs accounting for 97 percent of their employment and 60.3 percent of the economy.
China, the largest economy in Asia, also owes much to SMEs since they account for 64.7 percent of employment and 60 percent of its gross domestic product.
“The use of technology, such as cloud-based accounting, digital payments, and the automation of invoicing and settlement processes, can enable SMEs to substantiate their business activities and become eligible for finance,” Yoshino said.
On Monday, Data from the MSME Development (MSMED) Council showed there were over 30,000 new businesses registered in the January- to-May period this year. Registered businesses in the Philippines went up to 1.42 million as of May, from 1.39 million in December.
Trade Secretary Ramon M. Lopez vowed to intensify the information campaign to encourage more Filipinos to go into business. The Department of Trade and Industry also intends to spread more information on the benefits of the Barangay Micro Business Enterprise law.
The MSMED Council plans to synchronize data and figures produced by the Philippine Statistics Authority and the National Economic and Development Authority on MSMEs.
It also intends to count the MSMEs in the informal sector, or those who are not registered with the government. These statistics, the MSMED Council argued, will help the DTI, Bangko Sentral ng Pilipinas and other finance institutions grasp where microfinancing is needed.