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Senate panel eyes passage of bill imposing VAT on digital transactions before end of 2023
Philippines
National
Senate panel eyes passage of bill imposing VAT on digital transactions before end of 2023
Senate panel eyes passage of bill imposing VAT on digital transactions before end of 2023
Published Jul 10, 2023 08:57 am
Senator Sherwin Gatchalian on Monday, July 10 said the Senate is eyeing the passage of the bill imposing a 12 percent value added tax (VAT) on digital transactions before the end of the year.
Sen. Sherwin Gatchalian (Senate PRIB Photo)
Gatchalian, chairman of the Senate Committee on Ways and Means, said the measure has already been approved by the House of Representatives, so the bill is now being finalized by the technical working group (TWG).
“Of course, what we want is clarity in the law that we will produce, and we’re trying to shoot a completion of this bill by the end of the year,” Gatchalian said in an interview on ABS-CBN News Channel (ANC).
The senator further clarified that the bill imposing VAT on digital transactions is not a new concept but rather a means for the government to plug tax gaps with digital services providers.
The Senate ways and means panel has been tackling Senate Bill No. 250, filed by Sen. Pia Cayetano and various similar measures that are pending before the committee.
“This is not a new imposition, the 12% VAT is being imposed on physical goods right now in our country. So if you buy anything in shopping malls or even domestic online marketplaces, you have to pay 12% VAT, so it's not a new imposition,” Gatchalian said.
“So what we're doing right now is to plug the gaps with digital services providers,” he stressed.
Gatchalian pointed out that websites like Netflix or Amazon data centers, which are hosted outside of the Philippines are not subject to the VAT “because our law does not require it.”
“And so this proposal is to plug the gaps so that digital service providers outside of the Philippines will be mandated to also pay VAT on their services that they provide here in the Philippines,” he stressed.
Gatchalian said the government is looking to collect P17-billion per year on average to P97-billion for the next five years once it is implemented.
“So it will gradually increase because a lot of these digital service providers will be mandated to register. The first step is to register. So all of these websites will have to register in the Philippines. And after registering, VAT will be imputed in their retail costs to consumers here in the Philippines,” he explained.
Gatchalian also pointed out that during the Senate inquiry last week, seven (7) nations in the 11 ASEAN countries have already imposed VAT on digital service transactions.
The Philippines “is in the minority” or one of the five who do not impose VAT on digital service transactions.
“So in other words, the whole world is moving into this direction. All of the OECD (Organisation for Economic Cooperation and Development) countries have this type of imposition. So we're actually in the minority. And we're actually the last few countries who are not imposing VAT on digital service transactions,” he pointed out.
Gatchalian also downplayed concerns that the move to impose VAT on digital transactions could cause friction with the Philippines’ trading partners, as the measure only aims to “even out the playing field.”
“If it were our local companies, for example, iWantTV of ABS-CBN. If they sell their Filipino movies, let's say to Singapore, Malaysia, it's already being imposed VAT or GST in their jurisdictions. So Filipino companies here who sell services, digital services to another jurisdiction is being imposed GST or VAT already,” he explained.
“So everyone's doing the same. So we're just moving our country to the same level because VAT is a global best practice that's being imposed both for physical services, physical goods and digital transactions,” he further said.
Sen. Sherwin Gatchalian (Senate PRIB Photo)
Gatchalian, chairman of the Senate Committee on Ways and Means, said the measure has already been approved by the House of Representatives, so the bill is now being finalized by the technical working group (TWG).
“Of course, what we want is clarity in the law that we will produce, and we’re trying to shoot a completion of this bill by the end of the year,” Gatchalian said in an interview on ABS-CBN News Channel (ANC).
The senator further clarified that the bill imposing VAT on digital transactions is not a new concept but rather a means for the government to plug tax gaps with digital services providers.
The Senate ways and means panel has been tackling Senate Bill No. 250, filed by Sen. Pia Cayetano and various similar measures that are pending before the committee.
“This is not a new imposition, the 12% VAT is being imposed on physical goods right now in our country. So if you buy anything in shopping malls or even domestic online marketplaces, you have to pay 12% VAT, so it's not a new imposition,” Gatchalian said.
“So what we're doing right now is to plug the gaps with digital services providers,” he stressed.
Gatchalian pointed out that websites like Netflix or Amazon data centers, which are hosted outside of the Philippines are not subject to the VAT “because our law does not require it.”
“And so this proposal is to plug the gaps so that digital service providers outside of the Philippines will be mandated to also pay VAT on their services that they provide here in the Philippines,” he stressed.
Gatchalian said the government is looking to collect P17-billion per year on average to P97-billion for the next five years once it is implemented.
“So it will gradually increase because a lot of these digital service providers will be mandated to register. The first step is to register. So all of these websites will have to register in the Philippines. And after registering, VAT will be imputed in their retail costs to consumers here in the Philippines,” he explained.
Gatchalian also pointed out that during the Senate inquiry last week, seven (7) nations in the 11 ASEAN countries have already imposed VAT on digital service transactions.
The Philippines “is in the minority” or one of the five who do not impose VAT on digital service transactions.
“So in other words, the whole world is moving into this direction. All of the OECD (Organisation for Economic Cooperation and Development) countries have this type of imposition. So we're actually in the minority. And we're actually the last few countries who are not imposing VAT on digital service transactions,” he pointed out.
Gatchalian also downplayed concerns that the move to impose VAT on digital transactions could cause friction with the Philippines’ trading partners, as the measure only aims to “even out the playing field.”
“If it were our local companies, for example, iWantTV of ABS-CBN. If they sell their Filipino movies, let's say to Singapore, Malaysia, it's already being imposed VAT or GST in their jurisdictions. So Filipino companies here who sell services, digital services to another jurisdiction is being imposed GST or VAT already,” he explained.
“So everyone's doing the same. So we're just moving our country to the same level because VAT is a global best practice that's being imposed both for physical services, physical goods and digital transactions,” he further said.