The Philippines is seeking a $100-million (over ₱5.8-billion) loan from the Manila-based Asian Development Bank (ADB) to finance the Bureau of Internal Revenue’s (BIR) digital shift.

The ADB disclosed in October that the proposed Digital Transformation for the BIR Project, targeted for approval in 2026, will be implemented under the BIR as the executing agency.

ADB data indicated that the multilateral lender has cleared the loan concept and concluded its fact-finding on the financing proposal last month.

According to the ADB, the project aims to enhance the country’s tax administration system and improve taxpayer compliance through digitalization.

It covers a nationwide scope and is expected to increase compliance with tax laws and regulations by streamlining and automating tax processes.

The ADB noted that expected project deliverables include a fully integrated and operational tax portal and electronic invoicing system (EIS), an institutionalized change management mechanism, and the implementation of effective project governance measures.

Last month, Manila Bulletin asked top officials of the BIR and the Department of Finance (DOF), which oversees the country’s top tax-collection agency, for more details about the forthcoming ADB loan, but they did not reply.

The ADB earlier extended a total of $469,000 in technical assistance (TA) grants to fund the Supporting Domestic Revenue Mobilization in the Philippines Project, which paves the way for the upcoming Digital Transformation for the BIR project loan.

ADB documents showed that the TA grants are directly financing the upgrade of six core modules of tax administration: the BIR’s online registration and update system (ORUS), electronic filing and payment system (eFPS), electronic invoicing/receipting and sales reporting system, internal revenue integrated system (IRIS), online withholding system, and taxpayer ledger.

According to an ADB policy guide titled “Taxing Informal and Hard-to-Tax Sectors” published last July, “smart enforcement can help governments unlock revenue potential from the informal, noncompliant, and hard-to-tax sectors by enabling targeted, data-driven enforcement strategies that maximize returns.”

“By leveraging big data and advanced analytics, tax authorities can identify high-risk sectors both inside and outside the formal sector,” the ADB said.

“Machine learning algorithms can analyze patterns of noncompliance, prioritize audits, and predict areas where enforcement will yield the highest revenue. This approach allows governments to allocate limited enforcement resources efficiently, focusing on sectors with significant tax gaps or high evasion rates,” the lender added.

In general, the ADB said that revenue authorities like the BIR and the Bureau of Customs (BOC) in the Philippines should target their enforcement efforts toward both registered but noncompliant, as well as unregistered and noncompliant sectors.

The ADB said that hard-to-tax sectors—such as agriculture, small retail, and professional services—are often registered but remain challenging to tax due to cash-based income and high evasion, requiring targeted tools like presumptive taxes, tech-driven enforcement, and tailored compliance.

Beyond smart enforcement, taxing informal and hard-to-tax sectors can be improved through simplified registration, tailored presumptive taxes, and digital tools like e-payments and e-invoicing—supported by ongoing education to boost trust and broaden the tax base, the ADB said.

(Ricardo M. Austria with Derco Rosal)