BUSINESS leaders in Cebu welcome the Bureau of Internal Revenue’s (BIR) move to impose a one percent withholding tax on online merchants, saying this promotes just and fair retail competition.
Charles Kenneth Co, president of the Cebu Chamber of Commerce and Industry, said implementing this new policy will increase tax compliance and also even the playing field with the brick-and-mortar stores in terms of tax liability.
The BIR released on Dec. 21, 2023 Revenue Regulation 16-2023, imposing withholding tax on gross remittances made by electronic marketplace operators and digital financial services providers to sellers or merchants effective Jan. 11, 2024.
Gross remittance is the total amount received by an e-marketplace operator or digital financial services provider from a buyer or consumer for the goods and services sold by or paid to the seller or merchant through the platform or facility of the e-marketplace operator or digital financial provider.
Under the BIR regulation, a withholding tax of one percent will be imposed on one-half of the gross remittances by e-marketplace operators and digital financial service providers to the sellers or merchants for the goods and services paid or sold through their platforms or facilities.
However, the tax is not imposed if the annual total gross remittances to an online seller for the past taxable year have not exceeded P500,000; if the cumulative gross remittances to an online seller in a taxable year have not yet exceeded P500,000 or if the seller is duly exempt from or subject to a lower income tax rate pursuant to any existing law or treaty.
The regulation covers marketplaces for online shopping, food delivery platforms, platforms to book lodging accommodations, and other similar online service or product marketplaces.
About time to be taxed
According to P&A Grant Thornton, in its column in SunStar Cebu on Jan. 13, the increasing number of sale transactions conducted through online platforms has resulted in the need to create fair competition and equitable tax collection between physical stores and those operating on
digital platforms.
Robert Go, spokesman of the Philippine Retail Association (PRA) Cebu chapter, believes online merchants with earnings of P500,000 annually should have been taxed higher to be fair with brick-and-mortar stores that have been paying 12 percent value-added tax (VAT) and other taxes besides the corporate income tax.
“Online sellers are selling cheap for their goods since they are not paying taxes and they don’t have an overhead expense on a store display. It’s about time they are taxed. PRA lobbies for just and fair competition,” said Go.
Go said that one percent is not even enough compared to the 12 percent VAT that brick-and-mortar stores have been paying.
“It’s way too low and unfair,” he said. “Local retailers are subject to many regulations, taxes, fees, high labor cost, high overhead cost, yet foreign online (sellers) escape all regulations and sell cheap to the detriment of local retailers who are the lifeblood of the Philippine economy... and they employ 20 percent of the total workforce in the country.”