The Department of Finance (DOF) asserted that online sellers should be subject to the same tax obligations as traditional brick-and-mortar business owners for the sake of fairness.

Finance Secretary Benjamin E. Diokno said the collection of withholding tax on online sellers by the Bureau of Internal Revenue (BIR) is driven by the principle of fairness, and it does not constitute a new tax.

Withholding tax is a type of tax collected from various income sources, including salaries, wages, interest, and other earnings.

“It's a matter of fairness because if you buy from a regular store, you have to pay taxes. But here [in online business], you don't have to pay, and that's unfair,” Diokno told reporters.

Diokno stressed the need for individuals to view the tax system as fair and willingly fulfill their tax obligations.

The BIR has proposed a new rule that would require online platform providers, such as Lazada and Shopee, to withhold one percent of the money they pay to their partner sellers. This withholding tax would be applied to half of the total amount being paid.

The BIR explained that this is not an additional tax, but rather a way to enforce existing tax laws and ensure proper tax collection.

“It’s not only increasing tax revenues, it's a matter of fairness. A good tax system should be fair. That should be one of the characteristics of a good tax system, fairness,” the finance chief said.

BIR Commissioner Romeo D. Lumagui, Jr. earlier said the tax agency aims to begin collecting a creditable withholding tax from online platform partner merchants by the fourth quarter of 2023.

Lumagui also said that their objective is to fully implement this tax by next year.

He also explained that the purpose of imposing taxes on online merchants is to ensure a level playing field between traditional brick-and-mortar retailers and those selling on digital platforms or marketplaces.

The goal is to promote fairness and equal opportunities for all businesses, Lumagui pointed out.

The BIR, which contributes about two-thirds of the government's revenue, has been tasked to collect P2.599 trillion in 2023.

Lumagui said the BIR's increased efforts in enforcing tax compliance have resulted in higher revenue collection from January to May.

He said this serves as a strong basis for further improving tax collections during the remaining months of the year.