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The Philippines Looking to Regulate Fintech Sector

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The Department of Finance (DOF) is urging the country’s financial technology (Fintech) firms to be properly regulated and taxed, while also fostering the sector’s development and innovation. FinTech, according to the SEC, is software, a service, or a business that uses cutting-edge technology to make financial procedures and transactions more efficient than traditional methods. The SEC and BIR need to keep a close eye on Fintech firms to see what new digital business models they are adopting to figure out how they should be regulated and taxed, according to the finance chief.

DOF Secretary Carlos G. Dominguez III said in a statement that he has instructed the Securities and Exchange Commission (SEC) and the Bureau of Internal Revenue (BIR) to collaborate to ensure Fintech companies follow the government regulations.

Moreover, Dominguez instructed the SEC to strengthen its PhilFintech Innovation Office, which acts as the first point of contact for Fintech firms seeking registration, as well as those that have been operating or are launching new Fintech products. He urged the SEC to prepare for a surge in Fintech operations and the several variations of its business models by increasing funding for Fintech-related programmes and staffing its PhilFintech office with young, technologically skilled workers, among other measures.

If would be wise for the BIR to employ more young individuals who are skilled in digital technology to monitor Fintech-related businesses and assist the bureau to develop its tax base more efficiently. “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,” Dominguez said during a recent meeting with BIR and SEC officials.

The list of Fintech-related businesses issued by the SEC and the Bangko Sentral ng Pilipinas (BSP) has helped the BIR discover companies that have not yet registered with the bureau for taxes purposes, according to BIR Deputy Commissioner Marissa Cabreros.

“We will continue to impose current Tax Code rules on compliance and taxation based on actual activities of FinTech companies which are akin to or similar to activities of ordinary corporations or financial institutions,” Cabreros said.

Cabreros went on to say that the BIR is now validating the registration profiles of existing FinTech businesses based on the list supplied by the SEC and the BSP and that those that are not yet registered and in compliance with their tax duties would be guided and supported.

Dominguez directed Finance Undersecretary Antonette Tionko to keep a close eye on the BIR-SEC endeavour to broaden the tax base of Fintech-related businesses by ensuring that the two agencies have “adequate regulatory and collection strength for these digital technology companies.”

According to Tionko, the BIR and SEC should also cooperate with the Department of Trade and Industry (DTI), which has done extensive research on Fintech and maintains a list of Philippine companies involved in the sector.

OpenGov Asia reported, the BSP is partnering with the private sector to establish an Open Finance Oversight Committee (OFOC), a self-governing body led by the industry. This body, which is expected to be completed within a year, is tasked with adopting, updating, and enforcing the rules of conduct for an open financial system.

The OFOC will establish its standards and procedures, as well as promote “non-discriminatory membership” that will include banks, non-bank financial institutions, electronic money issuers, and payment system operators, as per the central bank.

The study, titled “Mapping a Secure Path for the Future of Digital Payments in APAC,” gathered 1,618 responses from people all over the region. It investigated their attitudes toward digital payments as well as the factors that influenced their decision to use fintech.

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