With the government claiming it is now short on cash and badly needs revenues to arrest the slide of the local economy, the Duterte administration is moving to introduce tax on the digital economy, particularly on video-streaming companies and large online sellers.
On June 1, the Bureau of Internal Revenue (BIR) issued the Revenue Memorandum Circular (RMC) no. 60-2020 which mandated that persons or businesses engaged in “digital transactions through the use of any electronic platforms and media, and other digital means” must register in order to be tax compliant to the Tax Code before July 31, 2020.
The circular also states that those who register beyond the deadline will be subject to a penalty. BIR deputy commissioner Arnel Guballa emphasized on June 11 that both individual and corporate taxpayers are required to register.
Department of Finance undersecretary Antonette Tionko said the memorandum was to encourage registration with the BIR rather than going after online merchants for unpaid dues, saying “online transactions have increased for quite some time now, especially during the community quarantine period. That’s why we want to take this opportunity to remind them to register their businesses.”
However, presidential spokesperson Harry Roque stressed in a press briefing that the directive was just an implementation of a law signed by former president Benigno Aquino III. He added that those earning below P250,000.00 will be exempt from paying income tax.
Several lawmakers have already voiced their opposition to the BIR circular.
ACT-CIS party-list representative Nina Taduran has acknowledged the need to be tax compliant, but explained that setting an immediate deadline and warning them of stiff penalty was insensitive. “Let the people recover first from the financial beating of this pandemic,” Taduran said.
Senator Risa Hontiveros has also asked the BIR to review and rewrite the memo due to its unclear provisions which have confused online sellers. “It would be good for the BIR to declare a moratorium regarding registration of online sellers and to reclaim the guidelines under the RMC 60-2020 while we are in a time of crisis,” she added.
Another recent digital tax initiative of the government is House Bill 6765 or the Digital Economy Taxation Act of 2020 by Albay representative Joey Salceda. It aims to establish “a fiscal regime for the digital economy” by imposing a 12% value-added tax (VAT) on video and streaming services such as Netflix, which will result in its subscription fee increasing from P129 to P145. The bill will also require “network orchestrators” such as Grab, Lazada, and other similar services to be withholding agents of income tax.
Companies who make less than P3 million a year will be charged with a withholding tax of 5% while those who make more will be imposed 10%. This means a Grab driver’s income will be withheld by 5% on top of Grab getting its 20% share.
While the RMC No. 055-13 tackles online shopping and retail, HB No. 6765 specifically covers all online transactions made through “network orchestrator systems.”
Salceda said the bill was drafted in order to alleviate the local economy of an approximate P120 million in foregone revenues. He also added that VAT collections may reach up to P30 billion since the e-commerce sector generates about P260 billion a year.