THE collection of the 1 percent withholding tax on online sellers improves transparency as it creates a “fair” and “accountable” digital business environment, an online tax-payment platform operator said.
Taxumo Inc. CEO EJ Arboleda said the collection of the withholding tax on online marketplace transactions creates a “transparent framework” that allows the Bureau of Internal Revenue (BIR) to have a grasp of the extent of e-commerce in the country.
“This initiative offers a transparent framework, allowing the BIR to gain valuable insights into the operations of online sellers, both registered and unregistered. Previously, such data was limited to client-supplier payment transactions,” Arboleda told the BusinessMirror.
“Now, with the online marketplace remittances being tracked, there’s an enhanced visibility into the e-commerce sector. This move is not just about tax collection; it’s about creating a fair and accountable online business environment,” Arboleda added.
With the BIR’s planned implementation of collecting withholding tax on all online sellers, the bureau is guaranteed to collect at least $160 million, since the country’s e-commerce market is projected to grow to $16 billion in terms of gross merchandise value (GMV).
“Given the $16 billion GMV of the e-commerce market in 2023, this strategy ensures a minimum 1 [percent] tax collection from all online sellers, contributing to the nation’s economic stability and growth,” Arboleda said.
Arboleda concurred with Internal Revenue Commissioner Romeo D. Lumagui Jr. that the imposition of the withholding tax on online sellers is no longer new.
“As the premier solution aiding self-employed individuals and MSMEs with tax compliance, Taxumo recognizes the importance of the BIR’s new 1-percent withholding tax on online marketplace transactions,” he said.
“It’s crucial to understand that this is not an additional tax burden for online sellers. Instead, it’s a prepayment mechanism, where the withheld amount can be credited against their income tax dues,” he added.
The BIR earlier disclosed that it plans to start collecting the 1 percent withholding tax from online sellers next month, at the earliest, or by January 2024.
The BIR plans to collect the tax through the e-commerce platforms that online sellers are using for their digital transactions.
The BIR is in the final phase of ironing out the rules that would govern the online withholding tax collection.
Nonetheless, the exemption for people earning less than P250,000 annually would also be implemented to online sellers.
Lumagui likened the situation of e-commerce platforms and online sellers to mall operators who collect the withholding tax from their tenants or lessees.
In a related development, Taxumo also disclosed that it will be extending free subscriptions to its tax payment options and educational webinars to digital content creators amid the BIR’s thrust to collect taxes from the online business environment.
“On Taxumo, business owners and self-employed professionals [like influencers and content creators] can track their income and expenses, auto-compute upcoming tax dues, file the appropriate tax forms, and conveniently pay online through accredited payment channels,” the firm said.
“Taxumo’s new service, Bill Pay Delay, also allows taxpayers to break their tax dues into flexible installments. This means taxpayers can better manage their cash flow thanks to this accessible tax payment option,” it added.
The BIR earlier disclosed that it’s in the process of crafting an “Oplan Digital Kandado” program to crack down on social-media influencers who failed to pay taxes. (Related story: https://businessmirror.com.ph/2023/11/03/bir-to-hunt-tax-evading-influencers/)