Digital economy tax not new – Dominguez

Published May 24, 2020, 12:00 AM

by manilabulletin_admin

By Chino S. Leyco

Taxation in the digital economy is not a new levy, instead it is just an expansion of the value-added tax (VAT) base, the Department of Finance (DOF) clarified.

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While capturing digital services such as e-commerce and video streaming platforms is critical for the tax authorities as consumers move their spending online, Finance Secretary Carlos G. Dominguez III said this is not a new tax.

“There are no new taxes and no increases in existing tax rates in the bill, and Chair Salceda has clarified that it is the tax base that he wants to expand,” Dominguez told reporters, referring to House Ways and Means Chairman Jose Maria Clemente Salceda.

“Chair Salceda’s bill deals with how we might capture digital purchases into the VAT base, and how to absorb profits generated by digital companies into our corporate income tax system,” he added.

Earlier, Salceda filed House Bill 6765, titled An Act Establishing a Fiscal Regime for the Digital Economy. If passed into law, the measure is estimated to generate up to ₱29.1 billion in additional revenues annually.

The VAT is a form of tax on the sale, barter, exchange or lease of goods or properties and services in the country and on importation of goods. It is an indirect tax, which may be shifted or passed on to the buyer, transferee or lessee of goods, properties or services.

“Taxation in the digital economy is being seriously considered – not just in the Philippines but in other countries as well,” Dominguez said, noting Indonesia has already took steps to bring the digital economy into its tax base.

Other countries in Southeast Asia, such as Singapore and Malaysia, already cover some digital services in their sales tax bases, he added.

But Dominguez assured the DOF will study the bill “very carefully and looking into what parts of the digital economy should be taxed,” citing the transnational nature of most of these online transactions.

“Ultimately, having a clear and efficient tax regime for the digital economy will be critical, as more and more taxable transactions shift from traditional means of doing business to more virtual avenues, a trend accelerated by COVID-19,” the finance chief said.

Dominguez had said the national government will not pro¬pose new tax measures amid the coronavirus pandemic despite its dwindling revenue resources.

He said they will adhere to Senate President Vicente C. Sotto III’s “suggestion” not to resort to new taxes in raising funds for the country’s coronavirus response.