The government’s plan to maximize the use of digital payment solutions for tax collections would face headwinds due to several issues hounding the Philippines, the state-run think tank National Tax Research Center (NTRC) said.

Based on a NTRC journal “The Role of Payment Systems in Philippine Tax Administration,” the country’s internet connectivity issue and the anemic payment infrastructure are main barriers to the efficient and effective implementation of payment systems.

Likewise, the "lukewarm attitude” of the many Filipinos toward digital payments is also slowing the country’s digitalization shift, NTRC said.

In the 2018 Government E-payments Adoption Ranking (GEAR), a global index that measures state’s efforts to enable e-payments adoption, the Philippines ranked only 55 out of 73 nations with an overall score of 58.2 percent.

“One of the factors that contributed to the slow adoption of digital payments in the country was the persistent belief of the general public that the use of cash remains the fastest and safest way to go about their transactions,” NTRC noted.

A separate report by Financial Technology in 2017 also showed that 96 percent of transactions in the Philippines were still done in cash.

“There was also a lack of reliable and secure payment infrastructure in the country, which plays an important role in the public’s acceptance of digital payment,” NTRC said.

“Another major factor that inhibited the development of digital infrastructure in the country cited in the study was connectivity issues,” it added.

While major cities already have access to fast internet connection, some areas in the country still struggle with unstable, and sometimes lack of connectivity. Compared with Malaysia and Singapore, the Philippines is lagging behind in terms of electronic payment systems.

“Digital payments in Malaysia and Singapore are already established due to their governments’ active role in the transition to electronic payment,” NTRC said.

Singapore committed significant resources to development regulation that encourages innovation in payment services, while Malaysia have a particular focus on improving the e-services infrastructure, the think tank noted.

“The adverse effect of the COVID-19 pandemic has more than ever, highlighted the importance of digitalized tax administration not only to ensure the safety of tax authorities and taxpayers from the threat of the virus, but also as a means to effectively collect taxes,” NTRC said.

“Both tax authorities and taxpayers should maximize the use of payment systems to help the government collect the much-needed taxes especially at this time of pandemic to foster growth that would lead to the country’s economic recovery,” it added.