DOF allays fears of online micro entrepreneurs

MANILA, Philippines — Registering their businesses with the Bureau of Internal Revenue (BIR) will not necessarily mean additional tax burden for online sellers, Finance Secretary Carlos Dominguez III said yesterday, amid the backlash from various groups shocked by the tax agency’s directive issued while many parts of the country are still under quarantine.

“What we are asking right now is just for online sellers to register with the BIR. Whether or not they will be subject to tax depends on their specific circumstances,” Dominguez said in a text message to reporters.

Citing the Tax Reform for Acceleration and Inclusion (TRAIN) Act, Dominguez said online sellers – recognized as self-employed individuals – would be exempted from paying income tax if they earn P250,000 and below annually.

“Self-employed individuals are subject to the graduated rates in the Tax Code. For instance, a seller earning less than P250,000 will be subject to zero income tax. The rates for individuals have really gone down since TRAIN,” Dominguez said.

Furthermore, he said sellers with gross receipts not exceeding P3 million are exempted from value-added tax (VAT).

For online merchants with earnings above these thresholds and who have not settled their tax liabilities, Dominguez said they may be eligible for the proposed general tax amnesty program, which is still pending in Congress.

“If they have any tax liabilities that are unpaid for prior periods, then they certainly can be covered by a general tax amnesty. That is why we are still waiting for Congress to pass the legislation on tax amnesty,” he said.

The BIR earlier issued Revenue Memorandum Circular 60-2020, which notified those who do business through digital platforms to register with the tax agency on or before July 31.

It also encouraged online businesses to declare and pay the corresponding taxes on past transactions, without penalty, if the declaration and payment are made on or before the said date.

The agency warned that all individuals or corporations found later on to be doing business without complying with these requirements would be meted with applicable penalties under the law.

Finance Undersecretary Antonette Tionko stressed earlier that the goal of the circular is not to chase after online sellers, but simply to remind them to register their businesses with the BIR.

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 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.” Sen. Risa Hontiveros also said the BIR’s directive was ill-timed.

“This is the season of pandemic and quarantine, I think the matter of timing and prioritization will really make a difference to how people can survive this double crisis,” Hontiveros said.

Sen. Sherwin Gatchalian said taxing online sellers is “ill timed and insensitive.”

“Taxation on online goods and services during the pandemic will also prompt digital entrepreneurs to pass on the additional expenses to their customers, mostly belonging to the middle-class brackets,” Gatchalian 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, Cecille Suerte Felipe