Lawmaker eyes new revenue stream from digital tax law
AS floor deliberations on House Bill 7425 (Digital Taxation Act) resume, a lawmaker said the proposal would aid the country’s economic recovery by tapping new revenue streams.
In defending the passage of the bill, Aambis-owa Party-list rep. Sharon S. Garin said the government is expected to gain P10 billion upon the enactment of the measure that can be used to fund Covid-19 response projects and galvanize the country’s economic performance.
Garin added the measure is set to foster fair competition and provide equal footing between traditional and digital businesses by clarifying the imposition of value-added tax (VAT) on digital service providers.
As the digital economy grows, she maintained that rules and standards must be set in place to ensure that there is no tax leakage.
She also underscored the inequity between major non-resident foreign corporations that profit from Filipino consumers without being required by law to pay taxes, while locally-registered businesses are automatically subjected to it.
“The intention of the bill is to reduce the burden of taxpayers by simplifying payment without compromising accountability,” Garin explained.
She said the bill provides a clearcut process on how to treat digital service providers and bring within the fold of taxing authorities those who have been doing business through online platforms.
It will also enable the government to exercise regulatory powers and give consumers a sense of security, given that most digital transactions are unregulated.
The bill provides a clear definition of a liable digital service provider and requires non-resident DSPS to collect and remit the VAT on the transactions that pass through its platform. Non-resident DSPS will also be required to register for VAT if gross sales or receipts for the past year have exceeded P3 million.
Garin also clarified that the tax to be imposed will only be on transnational digital transactions and that there is no expected increase in the price of online transactions for locally-established service providers.
For his part, House Ways and Means Chairman Joey Sarte Salceda, one of the principal authors of the bill, said the bill meant to introduce tax parity between resident companies and non-resident digital companies.
Salceda said that the bills aim “to level the playing field between traditional and digital businesses by clarifying the imposition of VAT on digital service providers and to generate revenues from new sources to fund the country’s efforts to recover from the adverse impact of Covid-19.”
“We will not be taxing small businesses. Everyone making P250,000 in annual income will be exempt. Everyone accredited under the Barangay Micro Businesses and Enterprises law will be exempt. And we made sure online barter will not be taxed in any way under this bill,” Salceda said. “But we will definitely begin asking foreign digital giants to start paying their fair share in the development of the Philippine economy that they benefit from.”
Salceda said that the richest 20 percent of the population will pay for 77 percent of the tax burden under the proposal.
The tax burden, Salceda added, also increases progressively as one’s income grows. Additionally, Salceda says that 62 percent of incremental VAT revenues from his bill will come from foreign companies.