Online seller tax to drive up BIR’s H2 collection

MANILA, Philippines — The Bureau of Internal Revenue (BIR) is banking on the imposition of withholding tax on online sellers to boost its full-year collection after missing nearly 10 percent of its target in the first semester.

On the sidelines of the Third Wave Digital Initiatives launch of the Securities and Exchange Commission yesterday, BIR Commissioner Romeo Lumagui Jr. said the recently imposed one percent withholding tax on online sellers is expected to boost the agency’s revenue collection this year.

“It depends on how much will come in from this withholding tax. We are hoping that this will be enough because this is really a big industry (online transactions),” Lumagui told reporters.

“Potentially, this can really help us achieve our target,” he said.

The Cabinet-level Development Budget Coordination Committee (DBCC) has tasked the BIR to collect P3.05 trillion this year. From January to June, collections amounted to P1.34 trillion, about 44 percent of the target.

The first semester performance, however, was nine percent lower than the P1.48 trillion target to be collected during the six-month period.

For now, Lumagui said the BIR has yet to determine how much exactly could be generated from the withholding tax on online sellers.

“I guess it would really reach billions, but we cannot say the exact (amount) because that’s precisely the problem – we don’t know the universe of the entire online transactions or online selling industry,” Lumagui said.

“This withholding tax will give us visibility on the online industry and determine how much it’s really worth,” he said.

The BIR chief also maintained that the withholding tax should not result in increased prices of products across online stores.

A withholding tax is a kind of tax on the salary earned by a certain employee.

Based on the current framework, employers are required to deduct a certain percentage of their employee’s salary, which in turn will be remitted to the BIR.

“This is an income tax. This is not VAT (value- added tax) that is imposed and added on the prices of products,” Lumagui said.

He added that other businesses should laud the initiative as this would level the playing field among brick and mortar stores that are paying taxes.

On the other hand, it will also benefit consumers by ensuring that the products they buy online are registered and legal.

Lumagui said the BIR had long dialogues with e-commerce platforms, which also committed to prohibit unregistered merchants from selling.

“If we see platforms allowing unregistered online sellers, they are also at risk of being shut down,” Lumagui said.

According to the BIR, e-marketplace refers to a digital platform whose business is to connect online consumers with online merchants, facilitate and conclude the sales, and process the payment of the products, goods or services through the platform.

It also facilitates the shipment of goods or provides logistics services and post-purchase support within such platforms and otherwise retains oversight over the consummation of the transaction.

This includes the marketplace for online shopping; food delivery platforms; platforms for booking of resort, hotel, motel, inn, house, condominium unit, bed space, room for rent and other similar lodging accommodations, and other service or product marketplaces.