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Gov’t taxation on online sellers is ill-timed, insensitive

Senator Win Gatchalian is imploring the Bureau of Internal Revenue (BIR) to defer its plan to impose taxes on small-time online sellers amid the COVID-19 pandemic, saying that the proposed taxation at the height of the economic and health crisis is ill-timed and insensitive.


MANILA, Philippines – A recorded Facebook live video of a Baguio City-based online seller of ceramics, branded “ukay” (second-hand) clothes, bags and watches can be viewed on social media, along with a smartphone on the foreground displaying a menu of fresh produce from online merchants, 14 June 2020. Senator Win Gatchalian said taxation on online goods and services during the pandemic will prompt digital entrepreneurs to pass on the additional expenses to their customers, and will impede the growth of the country’s growing digital economy. Photo by Mark Cayabyab/OS WIN GATCHALIAN

With the looming recession and record-high jobless rate, Gatchalian believes imposing taxes on the digital economy will only add unnecessary burden to ordinary Filipinos who are trying to make ends meet to feed their families who are hit hard by the ramifications of strict quarantine measures.

Taxation on online goods and services during the pandemic will also prompt digital entrepreneurs to pass on the additional expenses to their customers, mostly belonging to the middle-class brackets, according to Gatchalian.

The Vice Chairman of the Senate Committee on Economic Affairs also warned that premature taxation on online sellers at the height of economic turmoil will impede the growth of the country’s growing digital economy.

Citing a recent study by Google and Temasek, the Philippine internet economy posted a Gross Merchandise Value (GMV) of $7 billion in 2019. The value pales in comparison with Malaysia ($11 billion), Vietnam ($12 billion), Singapore ($12 billion), Thailand ($16 billion), and Indonesia ($40 billion).

The Philippines has not yet generated unicorns – a tech startup company that reaches a valuation of $1 billion – nor has our economy reflected the dynamism the Indonesian and Vietnamese eCommerce markets have reached, at 2.9% and 4.0% of GDP, respectively.

The Philippines’ eCommerce market remains at 1.6% of GDP.

“Importante ang tamang timing sa pagtatakda o pagtataas ng buwis. Hindi tama ang timing ng BIR na patawan ng tax ang mga online sellers na karamihan sa kanila ay nagsisimula pa lang makabangon muli dahil nawalan ng trabaho nuong kasagsagan ng Enhanced Community Quarantine (ECQ). Dahil sa kailangang mapanatili pa rin ang social distancing lalo na’t wala pang nadidiskubreng bakuna sa COVID-19, mas hinihikayat pa nga natin ang lahat na gumamit ng teknolohiya para lumipat na sa tinatawag na digital economy,” Gatchalian pointed out.

Instead of focusing on going after small fry online sellers, Gatchalian has urged the government to help create a vibrant digital economy by resolving some of the key concerns of the eCommerce industry such as lack of trust, improving internet and logistics infrastructures, and lack of governing entity at the regional level that can fight cybercrime and settle cross-border disputes.

Gatchalian has recently filed Internet Transactions Act to make online transactions easier and faster and strengthen the country’s digital economy.

The senator also said the government should impose a stringent crackdown on erring big time business establishments, such as the Philippine Offshore Gaming Operators (POGO) which owes the government some P50-billion in unpaid taxes, rather than going after online startups.

“Before we impose new taxes on the digital economy, we should first think of ways on how we are going to develop this industry in order to provide more jobs and opportunities to all Filipinos. I believe premature taxation will only do harm than good to our growing digital economy,” he said.