Tax on online transactions should come with consumer protection
THE House ways and means committee has passed a measure that would impose a 12- percent value added tax (VAT) on all online transactions. The substitute measure was a consolidation of three other House Bills (HBs) — 6765, 6944 and 4531.
The original HB 6765 was introduced by Rep. José María Clemente “Joey” Salceda, which seeks to amend Sections 57, 105, 108 and 114 of the National Internal Revenue Code to include taxing network orchestrators ( e. g., Lazada, AirBnB, Grab) and digital subscription-based services ( e. g., Netflix, Spotify).
HB 6944 on the other hand was authored by Rep. Sharon Garin. The proposed bill requires all digital service providers, whether local or foreign, to register with the Bureau of Internal Revenue ( BIR) and remit a 6- percent tax on their gross sales exceeding P3 million.
The odd one out on this consolidation is HB 4531. The bill, sponsored by Rep. Vilma Santos-Recto, aims to exempt the “sale of books, newspapers, magazines, journals, reviews, bulletins, and other educational or learning materials made or published in digital or electronic format” from VAT.
Based on media reports, the new measure “covers the digital advertising services, such as those on search engines and social media platforms; subscription- based services, including music and video streaming subscriptions; services rendered electronically; and transactions made through an information technology infrastructure, such as the internet.”
Implementation problems
Assuming that the substituted measure becomes a law and be known as The Digital Taxation Act (following Garin’s proposal), the same would suffer from IMPLEMENTATION INfiRMITIES.
Registration of online sellers and service- providers. The Digital Taxation Act requires prior registration of all providers using the digital platform. How can the BIR monitor each and every online merchant?
Padlocking of errant vendors and establishments. In the real world, if an establishment had not secured a business permit,
There are many more problems that the BIR could encounter if this tax measure is implemented. Remember, the digital world is a lot different from the real world.
Consumer protection
The imposition of VAT on online transactions will not burden the digital service providers, the network orchestrators, or the e- commerce businesses. The payment of VAT is a pass-on burden to the consumers.
( By the way, HB 6765 classified Lazada and Shoppee as “electronic commerce platforms.” This is utterly wrong. Lazada and Shoppee are e- commerce businesses. The e- commerce platform is the technology ( integrated hardware and software) that these e- commerce businesses are using. Is this an honest mistake or an indication of the e- commerce savvy [ or lack of it] of the authors of the proposed law?)
Since the consumers will be paying for additional VAT when doing online transactions, then the government, in return for these taxes, should afford protection to the consumers. Right now, the Department of Trade and Industry (DTI) is wanting in terms of consumer protection. What can we expect from the DTI in terms of “online” consumer protection?
Can the DTI assure the online consumers that they can seek redress in the event that the products and services that they bought online are substandard, or fall short of the required warranties and guarantees? I personally have doubts about the DTI’s capabilities.
Can the consumers be assured that the additional taxes that they will be shouldering for online transactions will be fully remitted to the government? I highly doubt this.
In the end, we, the consumers, will be paying extra for our online transactions and unscrupulous sellers could simply pocket it — right under the nose of the authorities who can do nothing to stop such nefarious acts.