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Online merchants tax under Salceda proposal

Joshua Lao

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The country’s tax planners are seriously considering the imposition of a tax on the various digital services, the plan having accelerated in the wake of a legislative proposal for the government to work on it already.

Finance Secretary Carlos Dominguez III said such a tax is under careful evaluation at the moment and its intricacies acknowledged this early in its development.

“We are prepared to tackle all the intricacies of imposing a tax on digital transactions. We are studying the bill of ways and means chair Jose Maria “Joey” Salceda very carefully and looking into what parts of the digital economy should be taxed,” Dominguez said.

House Bill 6765, titled An Act Establishing a Fiscal Regime for the Digital Economy, was estimated to generate P29 billion that could help fill the funding gap in the effort to contain the coronavirus disease pandemic.

“Chair Salceda’s bill deals with how we might capture digital purchases into the VAT (value added tax) base and how to absorb profits generated by digital companies into our corporate income tax system,” the Finance chief noted.

“We are studying how best these goals can be achieved, considering the transnational nature of most of these transactions. We are studying how the bill will fit in our tax administration system and which enhancements in our revenue regulations would be necessary should the bill pass into law,” he added.

According to him, there will neither be new taxes nor increments in the current tax schedule in the proposed bill as the lawmaker clarified it is the tax base that he wants to expand.

“Ultimately, having a clear and efficient tax regime for the digital economy will be critical, as more and more taxable transactions shift from traditional means of doing business to more virtual avenues, a trend accelerated by COVID-19,” he explained.

Salceda has said internet marketplace is growing at a fast rate but the government is unable to tap its potential as a tax resource because current definitions do not include online merchants as withholding agents.

“Simply put, these are not new taxes, These are tax administration measures we hope will capture the value more fairly, especially today when local businesses are struggling due to COVID-19 and there are these companies that are making a killing because of isolation, but are not paying enough taxes,” he explained.

The Cabinet official said the Department of Finance and the Bureau of Internal Revenue are studying ways of implementing the proposed tax measure.

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