THE House of Representatives will stand firm on the proposal imposing tax on digital economy, a leader of the chamber said on Wednesday, as the US announced that it will investigate countries imposing a digital services tax.
House Committee on Ways and Means Chairman Joey Sarte Salceda, principal author of the digital economy tax, pointed out that the Philippines will not introduce a new digital services tax, or increase any tax rates but will mandate untaxed digital services to pay their fair share.
“Our proposal will not be affected by this latest move from the United States. As you may be aware, we did not introduce any new digital services tax, or increase any tax rates, but are instead working to have them included in our existing tax base, so that all value created in the Philippines can be treated with parity, for tax purposes. That is the wisdom of the bill—it does not discriminate between goods in the traditional markets and goods and services sold digitally,” he said.
“In the Philippines, we are not asking for a new tax on these firms. We are just asking the untaxed to pay their fair share. Our old tax laws were not able to anticipate a new virtual world, so our regulations have not included them yet. But there is no question that they should be included in the tax base. If they make money out of Filipinos, they should pay the same taxes that everyone who makes money from Filipinos should pay. It’s not a complicated concept,” he said.
P29-B revenue
Last month, Salceda filed House Bill 6765 or the Digital Economy Taxation Act of 2020 to raise P29.1 billion new revenues for the country’s battle against Covid-19.
“Nonetheless, I think the US is grasping at straws with its latest move. Of course, it will look like these new taxes in Europe and other economies are aimed at specific companies—because those companies have a near-monopoly over their respective services. Monopoly has great pricing benefits to the monopolist, but the cost is also regulation, so they should not cry foul about it,” he added.
Salceda said House Bill 6765 is estimated to yield as much as P29.1 billion annually in incremental revenues from 12-percent value-added tax (VAT), 35-percent corporate income tax and 5-percent digital service tax that will be imposed on the digital economy.
Of this P29.1 billion, P1.20 billion will come from improvement of the tax compliance with network orchestrators as witholding agents; P4 billion from digital advertising; P2.9 billion from other digital services such as games and other digital media and P2.2 billion from subscription-based
services VAT.
Subscription-based services include music streaming such as Spotify, video streaming such as Netflix, and electronic publishing such as e-books.
Also, P3.5 billion will come from network orchestrators as withholding agents for VAT, P9.7 billion from e-commerce platforms as withholding agents for VAT and P5.7 billion from the corporate income from digital services.
Salceda said Netflix and Lazada have already expressed support for passage of the bill while Amazon has already asked the committee for a briefing on the measure.
Image credits: Roy Domingo
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