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TRJ 2009 Vol XXI No 6-b: Backgrounder on the Modes of Payment/Tax Payment Schemes Adopted by the ASEAN Countries, November – December 2009

This paper provides a backgrounder on the different modes of payment or payment schemes adopted by the ASEAN countries in collecting taxes due from their constituents. It puts the Philippines’ practices in tax collection side by side with those of its neighboring countries in the South East Asia in terms of the various tax payment schemes presently adopted for comparative purposes. This paper likewise intends to identify the payment schemes commonly adopted by each country to determine best practices which may be eventually adopted by the Philippines as a means to optimize revenue collection and taxpayer compliance. Furthermore, this paper also identifies unique practices of other countries which may be considered by the Philippines as alternative forms of payment for eventual adoption, if found feasible and sustainable. Modes of tax payment are the various schemes or means on how taxes are to be paid and collected. They provide a set of options to taxpayers for the payment of their tax obligations more conveniently, thus, enhancing voluntary compliance. On the part of the taxing authority, they serve as mechanisms by which to implement tax provisions more effectively and efficiently and at the same time optimize revenue collection. The modes of tax payment used by the ASEAN are as follows: direct payment, withholding tax system, payment through banks, bank debit system, e-payment, mobile payment (M-payment), payment through post office and payment through telephone. It shows that most ASEAN countries adopt the traditional direct payment scheme as well as the withholding tax system. The preference for the direct payment scheme is presumably based on its being simple, convenient, and straightforward. On the other hand, the use of the withholding scheme is premised on the need to ensure tax payment/collection especially in cases where the taxable transaction may be difficult to monitor or track. At the same time, the withholding scheme enables the government to collect and use the tax proceeds at a time when it needs to do so. It is interesting to note, however, that the Philippines, Indonesia, Malaysia, Singapore, Myanmar, and Brunei Darussalam also collect taxes through the banking system. This method is not employed in Thailand, Vietnam, Cambodia, and Lao PDR. The use of the banking system presents a convenient option to taxpayers especially since these entities are present almost everywhere. This system is also effective in preventing leakages in tax payments which may take place in the direct payment scheme. Indonesia, Malaysia, and Singapore are also using the payment through the Post Office scheme under which their postal system plays an active role in accepting tax payments. The Philippines appears to be the only ASEAN country using the Mobile payment or M-payment scheme and Tax Debit System. Malaysia, on the other hand, is the only ASEAN country adopting the use of credit cards while Singapore is the sole country employing payment through the telephone system. The Philippines, Singapore, Malaysia, and Thailand are also using the e-payment system. On the other hand, the bank debit system is employed by the Philippines and Singapore. The modes of tax payments that a country adopts play a pivotal role in its tax revenue generation efforts. Payment schemes that are easily accessible and convenient to taxpayers can help a lot in facilitating tax compliance and enhancing revenue collection. On the other hand, payment schemes that are complicated or not readily accessible to taxpayers will only produce adverse repercussions on revenue collection. In this regard, a review of existing tax payment schemes should be initiated by the concerned taxing authority with the objective of identifying its strengths and weaknesses and introducing reforms thereon based on the experiences and best practices available in other jurisdictions. The review should also reveal problems associated with existing tax payment schemes and how best to respond to them. Whatever is the tax payment scheme in place, the ultimate measure of its effectiveness is its impact on tax compliance and revenue generation. Needless to say, a payment scheme that makes tax compliance difficult or burdensome will only result in poor revenue collection.

National Tax Research Center
Authors Keywords
National Tax Research Center; ASEAN; Philippines; tax collection; tax; modes of tax payment; tax payment schemes; best practices; comparative study;
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Published in 2009 and available in the NTRC library or Downloaded 227 times since November 25, 2011
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