By Bernadette D. Nicolas & Jovee Marie N. dela Cruz
THE Bureau of Internal Revenue (BIR) clarified on Monday that temporary online sellers are not required to register their business activities, as the tax agency drew flak from lawmakers who said targeting pandemic-displaced workers trying to eke out a living was ill-timed.
According to BIR Deputy Commissioner Arnel Guballa, those required to register are people who are “habitually” engaged in the online selling business.
“Kung talaga namang sobrang liit na alam mo na you are not habitually engaged, hindi naman siguro kailangan magrehistro ka kasi you cannot be considered as engaged in a business,” Guballa said in a radio interview.
He added that online sellers earning an annual net income of less than 250,000 will not also be subject to tax.
Guballa explained that the RMC was aimed at helping BIR determine the number of online sellers in the country, adding that they are looking to focus their efforts first on domestic corporations before running after giant companies, such as Netflix and Google. “Actually, ang pakay talaga ng BIR dito sa yung itatax ang online, yung malalaki [the BIR’s target are the big online sellers],” he told DZBB, although he admitted the BIR also wants to look into the small businesses.
“We also want to look at the small ones because eventually, if their small business thrives, they may graduate to being merchants of, say, Lazada,” he said in a mix of English and Filipino.
July 31 deadline
The BIR made the clarification after drawing flak for issuing Revenue Memorandum Circular 60-2020 that reminded online businesses to register on or before July 31, 2020, and ensure their tax compliance.
Senators—Joel Villanueva, Risa Hontiveros, Sherwin Gatchalian and Juan Miguel Zubiri —earlier advised BIR to first go after the uncollected P50 billion tax due from Philippine Offshore Gaming Operators (POGO) before targeting “small fry” among taxpayers.
Despite criticisms, the Executive branch stood by this move, noting that the RMC is part of initial steps by the Department of Finance (DOF) and the BIR to implement a tax collection program on digital transactions.
The country’s premier revenue collector has suffered a huge dent in collections, as the Covid-19 pandemic shuttered businesses and forced it to reset thrice its deadline for annual tax filings. The controversial circular also encourages online businesses to declare and pay their corresponding taxes on past taxable transactions, without penalty, if declaration and payment are made on or before the said date.
Guballa said e-commerce giant Lazada has expressed willingness to cooperate with BIR by sharing their list of their online merchants.
He hopes that Shopee, Netflix and Facebook would also cooperate.
As for offshore online sellers in e-commerce platforms, Guballa admitted it would be hard for them to tax these given the technology, which he also said is the same challenge being encountered by other countries.
Digital economy
In a separate interview with the BusinessMirror, he said their study on taxing digital economy is still ongoing.
“How soon to tax online [selling businesses] is work in process,” he said, adding that it is hard to estimate how much taxes the government can get from registering online sellers.
For them to properly tax digital transactions, Guballa said new legislation is needed.
Lawmakers from both the Senate and the House of Representatives earlier pushed for imposing taxes on foreign companies that thrive in the digital economy.
Finance Secretary Carlos G. Dominguez III earlier said registering with BIR will not only help the government generate additional revenue but also ensure that businesses and their employees are eligible for government assistance programs.
Aside from these, Dominguez said businesses may also access government loans like Covid-19 Assistance to Restart Enterprises (CARES) Program by the Department of Trade and Industry.
Consultation with DTI
Lawmakers on Monday called for a consultation between the DTI and the BIR to help the latter assess the current state of online sellers and other small businesses ravaged by the pandemic.
Ang Probinsyano Rep. Alfred Delos Santos and House Committee on Trade and Industry Chairman Wes Gatchalian made the call following the backlash against the BIR order for online sellers to register and pay tax dues.
“What we need to focus on is how to help those who lost their jobs and livelihood find ways on how to recover,” Delos Santos said.
Delos Santos, meanwhile, appealed to the BIR to delay the implementation of its Memorandum Circular 60-2020.
“While we are cognizant of the role of the BIR to enforce tax laws and collect taxes to boost government coffers, we cannot hard to set aside the dire situation of small businesses and those who lost their jobs who are trying to make a living by selling online,” Delos Santos said.
If the BIR is serious about collecting taxes, Delos Santos suggested that it should go after the big fishes.
Meanwhile, Gatchalian clarified that the registration of an online business is for regulation purposes and does not mean it will automatically be taxed.
Gatchalian added the DTI encourages registration of online businesses to ensure consumer protection and to build trust and confidence in the use of these online platforms.
“By legitimizing one’s business through registration, it becomes eligible to avail of loans, subsidies and tax breaks from the DTI and other government agencies,” he said.
Moreover, Gatchalian said in his House Bill 6122, which would regulate online transactions, the regulatory framework he is proposing should not be taken as a barrier to business, but an opportunity for growth in terms of access to government programs and incentives.
Gatchalian added his bill also gives newly registered micro-enterprises exemption from all national and local taxes for the first two years of operation.
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