Cities that fully automated their business permitting systems recorded significantly stronger growth in local business tax collections than those that had not completed the shift, according to a Philippine Institute for Development Studies (PIDS) study.
The study, “Relevance of e-Governance in Revenue Generation among Philippine Cities,” found that fully automated Business Permits and Licensing Systems (BPLS) were associated with an 18.16-percentage-point increase in local business tax revenue growth.
Cities with fully automated systems also had more active business establishments, indicating that easier permitting and compliance processes may encourage business formation and expansion.
PIDS supervising research specialist Tatum Ramos and vice president Marife Ballesteros analyzed data from 138 cities to determine whether digital permitting contributed to local revenue generation and economic activity.
Under digital permitting systems, businesses can apply for permits online, pay through banks or e-wallets, receive electronic official receipts, and, in some cities, obtain permits electronically or through courier delivery.
The study cited Caloocan, Makati, Quezon City, and Valenzuela among the local governments that have adopted these services, reducing the need for business owners to make repeated visits to city halls.
According to the researchers, automated systems can improve tax administration through faster processing, better data management, and more efficient revenue collection while making regulatory compliance easier for businesses.
However, the study identified inadequate ICT infrastructure, limited funding, shortages of technically skilled personnel, resistance to organizational change, and taxpayers’ continued preference for face-to-face transactions as barriers to wider automation.
“The lack of ICT infrastructure is a key problem since this impedes the use of digital technologies at the organizational level and the general public,” the authors said.
The researchers also found that stronger internet capability significantly increased the likelihood that a city would operate a fully automated BPLS.
Despite relatively high levels of computer and internet use among formal-sector establishments, the use of online government services remained limited.
In 2021, 90.83% of establishments used computers and communications equipment and 80.96% had internet access. However, only 38.39% used the internet to make payments to government agencies.
“Not overcoming these obstacles can prevent the realization of e-Governance benefits,” the authors stressed.
The study recommended expanding ICT infrastructure, improving the technical capacity of local governments, integrating local platforms with the Department of Information and Communications Technology’s eLGU system, and improving interoperability among government agencies.
It also identified the recently enacted E-Governance Act as a possible vehicle for accelerating digital transformation and coordinating national and local government systems.
“The impact of fully-automated BPLS on LGU revenue generation is becoming apparent,” the study concluded.
