Tax on digital economy under study

MANILA, Philippines — The Bureau of Internal Revenue (BIR) is exploring ways on how to properly tax online-based shops as part of efforts to capture the digital economy and improve revenue collections, according to officials.

In a text message, Finance assistant Secretary Antonio Lambino said the BIR is conducting a study to come up with a proper framework on the taxation of web-based shops.

“They (the BIR) are still studying the taxation of the digital economy,” he said.

Lambino said this is part of the government’s priority under the digital transformation of the BIR, for better taxpayer service and ease of administration.

BIR deputy commissioner Arnel Guballa, in a separate interview, said proper tax regulations for the digital economy would broaden the BIR’s tax base to include online transactions, which are currently not being taxed.

“We also have to tax the digital economy. We have to capture them, pay the taxes. Because what is happening now is, we will go online, we will order, and anything we can order, we can get. There’s no receipt, we don’t pay taxes to the BIR,” he said.

Guballa said the BIR intends to plug the leakages coming from the digital economy to increase its revenues. However, he said there are no estimates yet on these leakages.

“We have not yet estimated the tax leakages but it will be substantial, in the sense that we see the market share of online selling. It is already big, so we are starting to look at it. We have instruction from the DOF to study on this,” the BIR official said.

The BIR and the DOF raided yesterday unregistered warehouses located in Guiguinto, Bulacan. One of the warehouses was found to be used by a popular online shopping site.

In 2013, the BIR issued Revenue Memorandum Circular 55-2013, which lays out taxpayers’ obligations in relation to online business transactions.

The circular states that online shops should register with the BIR and issue registered invoice or receipts.

They are also required to withhold and remit to the BIR the required creditable or expanded withholding tax, final tax, tax on compensation of employees, and other withholding taxes.

The BIR also ordered them to file the applicable tax returns, pay correct internal revenue taxes, submit tax compliance reports, and keep books of accounts for inspection of revenue officers.

“The existing tax laws and revenue issuances on the tax treatment of purchases (local or imported) and sale (local or international) of goods (tangible or intangible) or services shall be equally applied with no distinction on whether or not the marketing channel is the internet/digital media or the typical and customary physical medium,” the circular read.