THE Bureau of Internal Revenue (BIR) was asked at the weekend to defer the imposition of taxes on “small-time online traders,” as Sen. Sherwin Gatchalian lamented over the weekend its timing in the midst of the deadly Covid-19 pandemic.
Gatchalian, vice chairman of the Senate Committee on Economic Affairs, implored the BIR to suspend slapping online sellers with the new tax, adding that the proposed taxation “at the height of the economic and health crisis is ill-timed and insensitive.”
BIR had said all online sellers only have until July 31 to register with the tax agency.
Citing a looming recession and record-high jobless rate, Gatchalian aired serious concerns that “imposing taxes on the digital economy will only add unnecessary burden to ordinary Filipinos who are trying to make ends meet to feed their families who are hit hard by the ramifications of strict quarantine measures.”
He added that taxing 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 prodded government to prioritize running after big tax cheats like the online gaming operators. Similar advice was made last week by Sens. Joel Villanueva and Risa Hontiveros.
In a statement issued on Sunday, Gatchalian warned that premature taxation on online sellers at the height of economic turmoil will impede the growth of the country’s…digital economy.”
The senator quoted a recent study by Google and Temasek, showing the Philippine Internet economy posted a Gross Merchandise Value (GMV) of $7 billion in 2019, adding that the value pales in comparison with Malaysia ($11 billion), Vietnam ($12 billion), Singapore ($12 billion), Thailand ($16 billion), and Indonesia ($40 billion).
He noted that “the Philippines has not yet generated unicorns—a tech start-up company that reaches a valuation of $1 billion—nor has our economy reflected the dynamism the Indonesian and Vietnamese e-commerce markets have reached, at 2.9 percent and 4.0 percent of GDP, respectively.”
Noting that the Philippines’s e-commerce market remains at 1.6 percent of GDP, the senator stressed the importance of “right timing” of new tax impositions. “It is wrong timing for BIR to impose tax on online sellers, many of whom are just starting to recover after losing jobs or livelihood during the enhanced community quarantine [ECQ],” he said.
He pointed out that in fact, in the absence of a vaccine and the continued advice for people to observe social distancing at all times, “we are encouraging people to turn to technology and migrate to the digital economy,” he added, in a mix of English and Filipino.
Gatchalian suggested that instead of running after small online sellers, the government can “help create a vibrant digital economy by resolving some of the key concerns of the e-commerce industry such as lack of trust, improving Internet and logistics infrastructures, and lack of governing entity at the regional level that can fight cybercrime and settle cross-border disputes.”
He earlier asked Congress to frontload for early consideration the recently filed “Internet Transactions Act” to make online transactions easier and faster and strengthen the country’s digital economy.
At the same time, he prodded the Duterte government to crack down “on erring big time business establishments” such as certain Philippine Offshore Gaming Operators (POGO) which owe the government some P50 billion in unpaid taxes, rather than going after online start-ups.