Filipino Crypto Community Reacts to Proposed Taxing of Foreign Exchanges

Following Representative Joey Salceda’s resolution directing the House Committees on Ways and Means, as well as Banks and Financial Intermediaries, to hold hearings on the regulatory policies of the BSP and SEC concerning cryptocurrency exchanges, the Filipino crypto community is now weighing in. 

A key point of debate is whether they support the government’s plan to impose taxes on foreign and unlicensed crypto exchanges operating in the Philippines.

Community reaction:

In a Facebook post by BitPinas asking the Filipino web3 community if they support taxing foreign and unlicensed crypto exchanges in the country, the majority of responses were opposed.

One commenter pointed out that the Philippine government currently does not provide any services to foreign decentralized (DEX) or centralized exchanges (CEX), questioning the rationale behind taxing these platforms if the government isn’t offering them any support.

Another commenter highlighted the contradiction, noting that the government doesn’t allow foreign entities to operate or obtain licenses in the country, yet still seeks to tax them.

A community member also noted that taxing foreign crypto exchanges may be impossible due to the government’s inability to monitor millions of mobile apps. They noted that the government struggles to even collect taxes from the thousands of YouTubers in the Philippines.

Cryptocurrency itself still lacks specific regulations in the country.

Salceda’s resolution:

Recently, Representative Joey Salceda has filed a resolution urging the House to investigate BSP and SEC policies on cryptocurrency exchanges, with a focus on taxing foreign crypto service providers as a potential new revenue source. 

Salceda raised concerns about limited competition due to the moratorium on new virtual asset service provider (VASP) licenses and the advisory against Binance, which serves 9.3 million Filipinos. He also highlighted the lack of regulation for 500-1,600 overseas crypto exchanges accessible to Filipinos. 

The resolution is pending further congressional hearings.

Previous regulatory attempts regarding crypto:

In May 2022, The Philippines’ Department of Finance (DOF) proposed taxing cryptocurrency by 2024, potentially generating ₱284 billion annually. 

After 3 months, Salceda refiled the Digital Economy Value Added Tax (VAT) Law and plans to establish a working group to study the taxation of digital assets, including non-fungible tokens (NFTs) and cryptocurrency. Salceda highlighted the need to address ambiguities in current tax laws that hinder revenue capture from the growing digital economy, which generated only ₱45 billion in tax collections in 2019 and 2020. He emphasized that digital transactions should be subject to VAT and proposed creating a dedicated taxation service for the digital sector within the Bureau of Internal Revenue (BIR).

Advices:

In 2021, the Bureau of Internal Revenue (BIR) reminded cryptocurrency investors and play-to-earn gamers to register with the BIR and pay taxes, warning of penalties and jail time for non-compliance. 

To address concerns, Taxumo and PDAX hosted a webinar featuring tax experts Atty. Mike David and Atty. Kevin Baldonado to discuss crypto taxation in the Philippines.

Key points included:

• Virtual currency, including cryptocurrency, becomes taxable once converted to fiat.
• Taxable activities in play-to-earn games like Axie Infinity include trading, mining, and income from managing scholars.
• Tax thresholds and rates were explained for individuals and corporations.
• While crypto regulations remain unclear, all realized income is subject to taxation, and the government has vast authority in this area.
• Players and crypto earners are advised to comply with tax laws and seek professional help for tax avoidance, not evasion.

In addition, in 2022, tax expert Mon Abrea stated that while the Philippines currently lacks clear regulations on cryptocurrency taxation, the broad Philippine tax code implies that crypto taxes will be unavoidable once a proper collection mechanism is established. He criticized regulators for discussing new taxes without fully understanding cryptocurrencies and warned that Filipinos should prepare for potential crypto taxation in the future.

This article is published on BitPinas: Filipino Crypto Community Reacts, Rejects Taxing Foreign Exchanges

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