MANILA, Philippines — Facing the prospect of getting taxed, online sellers may have found an ally in an administration lawmaker who wants the Bureau of Internal Revenue (BIR) to exempt them and other entrepreneurs earning less than P3 million from value-added tax (VAT).
House ways and means committee chairman Joey Salceda yesterday said his panel has taken the position that the government “should go after the big money in big firms’ digital transactions, and not for BIR to go after the small entrepreneurs.”
“If your import is below P10,000, it should be exempt from duties. If your revenues are under P3 million, you shouldn’t have to register for VAT,” the Albay representative stressed.
Salceda said he plans to discuss the matter with the BIR through congressional hearings, particularly when the panel hears his House Bill 6765 or the proposed digital economy taxation bill that aims to tax apps and social media networks, including the popular streaming service Netflix.
“I especially want commitments from the BIR that the exemptions under the Customs Modernization and Tariff Act, Tax Reform for Acceleration and Inclusion law and the Barangay Micro Business Enterprise law be effected, so that we do not burden the small entrepreneur in these difficult times,” Salceda, a taxation expert, pointed out.
Salceda said that while he aligns with the principle of plugging leaks in the tax system, he believes that the government “has to do everything in a multi-stakeholder, multi-perspective way.”
The economist-lawmaker was reacting to the new BIR policy laid down in Memorandum Circular No. 60-2020, dated June 1, 2020 by Commissioner Caesar Dulay.
The Palace said it is in favor of the move, but stressed that those earning below P250,000 yearly should be exempted.
The order covers sellers and merchants as well as other stakeholders involved in digital transactions, such as payment gateways, delivery channels, internet service providers and other facilitators.
In a statement, the Department of Finance (DOF) clarified the BIR is not going after online sellers and that it is simply encouraging Filipinos doing business online to comply with the agency’s registration requirements.
“The goal of this project is not to go after online merchants for unreported sales or unpaid taxes. We just want to encourage those who are engaged in online businesses to register with the BIR,” DOF Undersecretary Antonette Tionko said.
“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. The BIR will issue an Operations Memorandum to this effect,” she added.
In a text message to The STAR, Finance assistant secretary Maria Teresa Habitan said online sellers earning P250,000 and below annually are exempted from income taxes as provided for under the Tax Reform for Acceleration and Inclusion (TRAIN) Act.
She said those with gross annual sales amounting to P3 million and below are also exempted from paying VAT.
“For VAT, (the threshold is P3 million). For income, (those earning) P250,000 are still exempt,” Habitan said.
“So if you are an online seller of masks, you don’t have to be afraid,” she added.
POGOs first
Senators have asked the BIR to focus on the big fish, particularly Philippine offshore gaming operators (POGOs), to generate revenues instead of trying to hook small fry like online sellers.
Sen. Joel Villanueva, chairman of the committee on labor and employment, yesterday prodded the BIR to prioritize the collection of back taxes from other sectors like POGOs, which owe the government at least P50 billion, to raise much-needed revenue.
With massive layoffs contributing to the spike in unemployment, Villanueva said the entrepreneurial spirit of online sellers has helped cushion the impact of the pandemic on livelihood.
“We know the government must collect taxes. Let’s focus on those that have been confirmed to have been delinquent in paying taxes,” Villanueva said. He said POGOs still owe the government P50 billion.
He also called on the BIR to intensify its information campaign to encourage micro, small and medium enterprises (MSMEs) to register with the BIR, to make them realize the benefits of doing so, as well as the taxes applicable to them.
Under the law, a sole proprietorship earning P250,000 or less is not subject to tax.
He said the government’s call for POGO firms to settle their unpaid taxes has apparently fallen on deaf ears.
Sen. Sonny Angara questioned the timing of the BIR order to tax online sellers “given the difficulties experienced by our countrymen.”
“But these are not new taxes but just collection of taxes due under existing laws. So if you ask a seller who has a store, he will say it’s only fair to have a level playing field since that seller pays the transaction taxes due. It should’ve been done earlier,” Angara said.
Sen. Francis Pangilinan said now is “not the time nor place to place more burdens on our citizens.”
“Now is the time to give them relief and support,” Pangilinan said.
Sen. Imee Marcos, who chairs the economic affairs committee, also said it’s bad timing to tax online sellers.
“Let’s give time for the underground economy to flourish and help jumpstart the country’s economy. Else, they will continue to depend on government subsidy, two to three years maybe,” Marcos said. Paolo Romero