House Ways and Means chair Rep. Joey Salceda has refiled the Digital Economy Value Added Tax (VAT) Law in the 19th Congress.
Salceda filed House Bill (HB) 372 as a means to “close ambiguities” pertaining to Value Added Tax (VAT) and tax laws.
In his explanatory note, Salceda enumerates digital services which include “advertising, subscription-based services, and other online services that can be delivered through the internet” should be considered “VAT-able.”
“The digital economy is growing rapidly, but digital economy taxation is falling flat. Imagine, in 2019, the digital economy tax collections of the BIR was at P45-billion. By 2020, it was still at around 45 billion. That’s hardly believable given the increase in digital transactions,” said the Albay 2nd district lawmaker on Sunday, July 10.
“It goes without saying that the digital economy should be subject to VAT, but we are unable to capture these revenues because of ambiguities in tax laws,” he said.
“Goods sold over the electronic space, meanwhile, should not need any further legislation to be covered, but I have proposed to the BIR that they establish a digital economy taxation service to have a dedicated unit for the growing digital sector,” the economist-lawmaker added.
Salceda estimates that the VAT taxation on digital transactions plus a digital economy taxation service could–over the course of five years–yield P226.5-billion in revenue.
He further added he would create a House Technical Working Group (TWG) within the Ways and Means panel to study the possibility of taxing digital assets, which include non-fungible tokens (NFTs) and cryptocurrency, and digital gambling.
“I will create a TWP on Digital Asset Taxation within the Committee on Ways and Means to study whether these assets can be considered services, and therefore VATable, or should be taxed differently…Unlike underground or informal gambling, we can capture digital gambling revenues through the payment systems employed. So, I am also deputizing a TWG for Digital Betting and Amusements Taxation to make recommendations to the Committee” Salceda concluded.
In the 18th Congress, HB 7425—which similarly sought taxation on digital transactions–was approved on its third reading but fell short as it reached the Senate as per the House of Representatives legislative archive. (Seth Cabanban)