Another tool to eliminate bribery and theft in government transactions with citizens, be they individuals or corporations, is within reach.
Last week, the Department of Budget and Management launched a system through which government agencies can buy supplies online without using cash. It is called “electronic payment system or e-payment.” The service is being offered through the Philippine Government Electronic Procurement System, or the Philgeps virtual store, with support from the state-owned Land Bank of the Philippines. Buying through the virtual store may be done any time of the day.
“A groundbreaking feat” for the Philippine bureaucracy, Budget Secretary Florencio Abad describes the project. The e-payment system “effectively brings us to the realm of cashless transactions, where procurement activities can be tracked and accounted for very quickly and accurately.”
Actually, Republic Act No. 9184, or the Government Procurement Reform Act of 2003, mandates national government agencies and public corporations, financial institutions, state universities and colleges as well as local government units (LGUs) to use Philgeps.
The Philippines is finally joining the movement among governments around the world to adopt cashless payment schemes. The movement got a big global push in September last year with the establishment of Better Than Cash Alliance (BTC). Founded by the Bill and Melinda Gates Foundation, Citi, Ford Foundation, Omidyar Network, USAID and Visa Inc., BTC is an “innovative public-private partnership that provides the expertise and resources needed to make the transition from cash to digital payments, which can increase the immediate accountability and tracking of financial flows, resulting in less corruption and theft.” The UN Capital Development Fund serves as BTC’s secretariat. The Philippines has signed up with the alliance.
BTC highlighted three key benefits of the e-payment system. The first is savings—it lowers the direct and indirect costs associated with physical cash. The second: speed and security as proven in the banking industry. But the most important is transparency. Financial flows—the disbursement of billions of pesos in cash payments for salaries, pensions, social welfare allowances and cash-for-work funds in electronic form—can be tracked in real-time, thus increasing transparency and reducing corruption and theft.
BTC has noted that cash payments to citizens often suffer from “high leakage,” which means the intended recipient not receiving the full amount. It cited the case of Afghanistan, where more than 1,200 Afghan national police receive their salaries through the Roshan’s M-Paisa service, the country’s first mobile money transfer service. When the employees first received their salary through mobile phones, a number of them thought they had received a nearly 30-percent raise, although in reality they were just paid the correct amount for the first time. When they were being paid in cash, 30 percent of their salary was being stolen “from the top.”
Abad is right to be optimistic about the online payment facility. “Because every step of the process can now be tracked and monitored, we can begin to close off all avenues for irregularity and, ultimately, establish better accountability across government,” the budget secretary explains.
There is so much scope for expanding the coverage of the Philgeps e-payment facility. It can be applied, for instance, to other government services like applications for licenses with the Land Transportation Office or for clearances with the National Bureau of Investigation.
A big boon to the citizenry will be its adoption in the payment of various taxes to the BIR, Customs and LGUs. This is possible as demonstrated by the federal government of the United States, which has been providing the Electronic Federal Tax Payment System (EFTPS) as a free service through the US Treasury. Since 1996, millions of businesses, individuals, federal agencies, tax professionals and payroll services have used EFTPS. All federal taxes can be paid through EFTPS, which is available by phone or online 24 hours a day, seven days a week—and a taxpayer can schedule a payment up to 365 days in advance.
Electronic payments and “cashless” transactions should be the norm for all government agencies soonest. Technology has made it possible: All law-abiding and taxpaying citizens should be able to transact with government from the comforts of their homes or offices, without going through the hassle of dealing with the bureaucracy and the unscrupulous elements lurking therein.