Digital transaction ...
“The additional tax burden at this time may pose some challenges and barriers to the swift recovery of these smaller enterprises and including also the gig workers who may rely on these digital channels in order to continue their means of livelihood so because we know that the additional tax burden may result in a lower income for them,” Messina-romero told senators tackling a measure seeking to impose VAT on digital transactions.
She pointed out that exempting small-value transactions from VAT will also work as an incentive for people to buy online since it would be cheaper compared to purchasing it from brick-and-mortar businesses.
“So by accepting small digital transactions from VAT, the minimum wage income earners shall not bear the burden of the new tax measure. It should instead reduce the potential adverse impact of this new tax on the poor and marginalized sectors that shift to digital services during this transformation of the Philippine economy,” she explained.
Apart from this, the BSP also proposed exempting from VAT the service fees charged by payment service providers for the use of digital payments so as not to hamper its adoption by individuals, businesses, and even government institutions.
On top of sustaining economic activities and citizens’ livelihood, digital payments are also used by the government to disburse social aid and other financial assistance, Messina-romero said.
“We particularly recommend this because we have noted that the fees associated with the use of digital payments have been a concern among citizens and merchants in adopting digital payments,” she said.
Fintech agrees, DOF balks
FINTECH Alliance, a trade organization across financial technology digital players operating in the country, backed BSP’S recommendations on the VAT exemption on small value transactions and on service fees charged by digital service providers.
Fintech Alliance Chairman Angelito Villanueva said these proposals will encourage more Filipinos to pay through digital channels and help the government agencies, such as the Department of Social Welfare and Development, in disbursing social aid to marginalized individuals.
However, BSP’S proposal to set a VAT exemption threshold based on the value of the transactions did not sit well with the Department of Finance, saying this may be difficult to implement.
Finance Assistant Secretary Dakila Elteen M. Napao of the department’s Revenue Operations Group said it would be better to stick to the original proposal to exempt from VAT those digital service providers with less than P3 million in annual gross sales and receipts.
“I think it will create problems to monitor the P500 threshold. Rather we are sticking to the proposed threshold of P3 million on an annual basis for the suppliers of digital services to be exempted from the VAT,” he said.
Napao explained that basing the VAT exemption on the value of transactions at around P500 may “erode the payments of right VAT on digital transactions” because there are services that are being offered by digital service providers that are within that threshold.
For its part, streaming platform Netflix Asia-pacific Indirect Tax Manager Davy Chen supported DOF’S view that the proposed VAT exemption on a transaction value basis will make it hard for the government to administer and for the taxpayers to apply.
“I would support DOF’S view to introduce a registration threshold as it is under the legislation rather than a per transaction value,” Chen said. “In case, say, for Netflix, we have both transactions that are above and below.”