Lower House OKs bill imposing VAT on digital transactions on final reading

The House of Representatives on Tuesday, Sept. 21 approved on third and final reading a bill that will impose value added tax on all digital and electronic transactions for goods and services.

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With 167 affirmative and six negative votes, House Bill 7425 was approved on final reading. The measure will be sent to the Senate for its approval.

Six members of the Makabayan bloc rejected the bill as they protested its passage amid the continued economic devastation of the COVID-19 pandemic.

HB 7425 consolidated four legislative proposals filed by Deputy Speakers Rep. Vilma Santos-Recto; and Degracias DV Savellano (1st District, Ilocos Sur); and Reps. Joey Sarte Salceda (2nd District, Albay) and Sharon Garin (AAMBIS-OWA).

Santos-Recto’s bill sought exemption of books, newspapers, magazines, journals and other educational or learning materials published in digital electronic format from VAT.

On the other hand, Savellano’s House Resolution 685 was included in the bill although the measure merely sought a legislative inquiry in determining whether or not online firms such as Grab, Lazada, Surplus, Shopee , Air BNB, Angkas and similar firms pay VAT.

Senior Deputy Minority Leader Carlos Isagani Zarate (Bayan Muna) and Asst. Minority Leader Arlene Brosas (Gabriela Partylist) assailed the passage of the measure as they warned that it would make life harder for majority of Filipinos who are confronted with the adverse economic effects of the COVID-19 epidemic.

 Zarate said imposing VAT on digital services is like adding insult to injury as he noted that government has allegedly miserably failed in its COVID-19 response.

As a result of government-imposed community quarantine measures, Filipinos relied heavily on internet and digital services for their basic needs, communications and even entertainment.

‘ “Sa internet na lang idinadaan ang pagbili ng kanilang pangangailangan para lang makaiwas sa COVID-19 kahit dagdag gastusin ang delivery fee nito. Maging ang kanilang mga libangan ay nakakahon na lamang sa digital media platforms kagaya ng Netflix, Spotify, Youtube, at iWantTFC. (They resort to internet services in purchasing their needs in order to avoid COVID-19 infection even if this would mean additional expenses in delivery fees. Even their only means of entertainment they merely rely on digital media platforms like Netflix, Spotify, Youtube, and IWantTFC),” he lamented.

With Congress decision to grant the wish of the Duterte government to impose VAT on said services, people will have to absorb additional expenses for for their needs, said Zarate.

“Why do we insist on imposing these regressive tax measures when we can increase the taxes on rich families and top corporations? The collective wealth of the 50 richest Filipinos grew 30% to P3.9 trillion despite the COVID-19 pandemic,” said Brosas in explaining her “no” vote.

She stated that the 12 percent VAT on digital transaction is the highest digital tax in the ASEAN region.

Under the bill VAT will be imposed on any person engaged in the exchange, lease, sale of goods or properties and services using digital or electronic platform.

“The value added tax is an indirect tax and amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods and properties or services,” the bill provides.

Digital service providers covered by VAT are third party that acts as conduit for good or services offered bya supplier to a buyer and receives commission from the deal; a platform provider for promotion that uses the Internet to deliver marketing messages; a host of online auctions conducted through the internet; supplier of digital services to a buyer in exchange of regular subscription fee and supplier of electronic online services that can be delivered through the internet, among others.