The Department of Finance (DOF) wants financial technology (Fintech) companies in the country to be properly regulated and taxed while encouraging the sector’s growth and continued innovation.
In a statement, DOF Secretary Carlos G. Dominguez III said Tuesday, Nov. 16, that he has tasked the Securities and Exchange Commission (SEC) and the Bureau of Internal Revenue (BIR) to work together to ensure Fintech companies’ compliance with government rules.
The SEC and BIR should closely monitor Fintech firms and find out what new digital business models they have been adopting to determine how they should be regulated and taxed, the finance chief said.
Dominguez ordered the SEC to strengthen its PhilFintech Innovation Office, which serves as the first point of contact for Fintech firms applying for registration, or for existing ones that have been operating or are introducing new Fintech products.
He said the SEC should anticipate a surge in Fintech activities and the many variations of its business models by, among others, providing an additional budget for its Fintech-related programs and staffing its PhilFintech office with young, digitally skilled employees.
He also said the BIR should fill its positions with more young people adept in digital technology to more efficiently monitor Fintech-related businesses and enable the bureau to further expand its tax base.
“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.
BIR Deputy Commissioner Marissa Cabreros said the list of Fintech-related businesses provided by the SEC and the Bangko Sentral ng Pilipinas (BSP) has helped identify those companies that have not yet registered with the bureau for taxation purposes.
“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 said the BIR is now validating the registration profile of existing FinTech companies, based on the list provided by the SEC and the BSP, and will guide and encourage those which are not yet registered and compliant with their tax obligations.
Dominguez directed Finance Undersecretary Antonette Tionko to be on top of the BIR-SEC initiative to broaden the tax base of Fintech-related enterprises by ensuring that these two agencies have “enough regulatory and collection muscle for these digital technology companies.”
Tionko said the BIR and SEC should also coordinate with the Department of Trade and Industry (DTI), which “has done a lot of groundwork on Fintech” and has a list of Philippine companies engaged in this activity.
According to the SEC, FinTech “refers to a software, a service, or a business that provides technologically advanced ways to make financial processes and transactions more efficient compared to traditional methods.”