SENATOR Pia S. Cayetano is pushing for enabling legislation that imposes value-added tax (VAT) on all digital transactions, saying it’s fair to traditional businesses that VAT law has covered for decades.
In Senate Act File 250, the senator proposes levying value-added tax on all sales and places, or exchanges of products and services that are made “digitally or electronically,” or using Internet technology, such as “online shopping, online video games, or The social network, or courses, webinars, online newspapers, and those with digital contents such as movies and music.”
Cayetano explained that the measure should not be seen as the imposition of a new tax, but rather a clarification of the mandate of the Bureau of Internal Revenue (BIR), which aims to strengthen the authority of the BIR so that it can properly collect VAT from all digital service providers located in and outside the country.
It added that it also underpins similar legislation referred by the House of Representatives to the Senate in the 18th Congress, which aims to equalize treatment and taxation of traditional and digital businesses.
Which, she explained, means that if VAT is charged on a purchase in a department store, then VAT must also be charged on a purchase made in the online shopping platform and BIR must also collect it from the digital service provider.
Furthermore, Cayetano noted that based on an international report, the Philippines has had “the fastest growing internet economy in Southeast Asia”, adding 12 million new digital consumers since the start of the Covid-19 pandemic in 2020 – apparently because the shutdowns It forced people to buy food and shop online for most of the needed products and services.
As the country continues to accelerate towards digitization, Cayetano said it is therefore important that the tax collection system keeps pace with developments.
In his State of the Nation address, President Ferdinand Marcos Jr. said the government is looking to raise 11.7 billion pesos in 2023 from imposing a value-added tax on digital service providers.