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Philippine Local Government Units to Boost Revenue Generation through Digitalisation

The country’s Finance Secretary, Carlos Dominguez III, has urged local government units (LGUs) to adopt digital technologies in tax administration and their other business processes for greater revenue generation and mobilisation capabilities under the new normal. Dominguez assured local executives that the Department of Finance (DOF) and its attached agency – the Bureau of Local Government Finance (BLGF)–are prepared to support their respective LGUs in modernising the local treasury and assessment service and helping them with digital transition initiatives.

According to a press release, Dominguez noted, “We have seen the future and it is fully electronic. We owe our constituents digital transformation of local governance.” He was speaking at the BLGF Stakeholders Recognition Programme held earlier this month. The event is part of the BLGF’s yearend programme under Executive Director Nino Raymond Alvina. It recognised the top-performing LGUs in local revenue generation for 2020.

The Finance Secretary congratulated this year’s top performers for innovating, improving, and sustaining operations to provide the best services to their constituents. He said that with the revenue share in national taxes of LGUs is due to increase dramatically starting next year, the local governments will be primarily responsible and accountable for providing their constituents with the basic services and facilities fully devolved to them.

These expanded responsibilities mean that LGUs have to boost their revenue collection and absorptive capacities as they build their way towards becoming self-reliant communities. LGUs will also play a key role in the country’s economic recovery that is now gaining momentum as provinces, cities, and municipalities are expected to lead grassroots planning, community infrastructure, and the initiation of more linkages to the economic mainstream on behalf of their constituents.

To accomplish these tasks, Dominguez stated that LGUs should adopt electronic facilities for business registration and renewal, as well as for the assessment and collection of local taxes, fees, and other charges. The local treasurers, for their part, should start linking up with the online payment facilities already offered by government financial institutions (GFIs), which also serve as their depository and servicing banks to ensure safe, efficient, and convenient ways of transacting with LGUs under the new normal.

Local governments must keep pace with this digital transition—starting with local government finance. The new economy will be highly digitised. All future processes will occur mainly online, Dominguez added. The central government and the LGUs need to work together to improve revenue generation and tax administration to make the country’s fiscal resources last amid the pandemic. When the pandemic struck, Filipinos relied on LGUs as the main implementors of public health regulations and as channels for the distribution of subsidies to the most vulnerable of their communities. The LGUs were also at the frontlines of the COVID-19 vaccination drive, with many of them saving lives and providing for the medical care of the afflicted.

In November, OpenGov Asia reported that the Philippines’ central bank, the Bangko Sentral ng Pilipinas (BSP), refreshed its six-year-old National Strategy for Financial Inclusion (NSFI) to make it more current and to reflect the impact of the COVID-19 pandemic and greater digitalisation of financial services. The BSP will launch an enhanced version of the current NSFI in January 2022. The Financial Inclusion Steering Committee (FISC), an interagency committee in charge of the NSFI and chaired by the BSP, had agreed to alter and update the NSFI. The move will push the bank to reassess the initial strategic plan and ensure that the NSFI continues to be a flexible framework for promoting financial inclusion across the country.

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