DOF Secretary Diokno Backs Online Seller Tax for ‘Fairness’

DOF Secretary Diokno says the creditable withholding tax on online sellers in the Philippines is about making the tax system ‘fair’.

DOF Secretary Diokno Backs Online Seller Tax for Fairness
  • DOF Secretary Benjamin Diokno defends the 1% creditable withholding tax plan for online platform partner-merchants, citing fairness and simplicity as key objectives.
  • The BIR is revising regulations to include income payments by online platform providers and aims to implement the tax by the fourth quarter, with full implementation expected next year.
  • UFCC criticizes the plan, expressing concerns about its impact on ordinary Filipinos who will bear the brunt of the new tax.

Department of Finance (DOF) Secretary Benjamin Diokno defended the Bureau of Internal Revenue’s (BIR) plan to collect a 1% creditable withholding tax from partner-merchants of online platforms, arguing that this would make the tax system “fair.”

Diokno on Online Seller Tax

During a press briefing, Diokno backed imposing taxes on online sellers similar to those imposed on regular stores. He emphasized that it’s not just about increasing tax revenue but also a matter of fairness. 

“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,” Diokno reiterated. 

He believes that if people buy from regular stores and pay taxes, the same principle should apply to online purchases to maintain a perception of fairness and encourage compliance with the tax system.

Photo for the Article - DOF Secretary Diokno Backs Online Seller Tax for ‘Fairness’
Finance Secretary Benjamin E. Diokno joined ANC’s Headstart with Karen Davila. Photo from Department of Finance

Diokno’s Views on the Impact of Tax on the Economy

“I think you have to look also at the impact of tax on the economy. Hindi lang yung single-minded na raise revenue. That’s not your only objective eh kasi fairness is also an objective. Simplicity is an objective. Kasi pwede ka makapag-impose ng tax pero napaka-complicated so di ka rin makakakolekta di ba?” Diokno explained.

Last year, the DOF Secretary echoed this sentiment about adding taxation on digital services, saying that it is fair to tax digital transactions in the same way that physical transactions are taxed.

On the other hand, in May 2022, Diokno expressed his opposition to the Finance Department’s proposed tax amendments, which includes taxation on cryptocurrency by 2024. Instead, he stated that the DOF should concentrate on the government’s tax administration during the first year of President-elect Ferdinand R. Marcos Jr.’s administration.

Creditable Withholding Tax on Online Sellers

The BIR is planning to implement a creditable withholding tax on partner-merchants of online platforms as early as the fourth quarter of this year.

“We are aiming for (its) full implementation by next year. It may even start by the fourth quarter. Hopefully, the private sector will be on board,” BIR Commissioner Romeo D. Lumagui, Jr. stated.

The bureau is revising Revenue Regulations No. 2-98 to include income payments by online platform providers. The proposed draft rules suggest a creditable withholding tax of 1% on half of the gross remittances made by online platform providers to their partner sellers or merchants. 

Online platform providers are intermediaries that facilitate transactions and act as the government’s withholding agent. Examples include marketplaces, food delivery, lodging, travel, and payment platforms.

Accordingly, the BIR will tax online transactions worth P10,000 or more, if the same buyer and seller 

Recently, the United Filipino Consumers and Commuters (UFCC)  urged BIR to rethink the plan, calling it a “heavy blow” to ordinary Filipinos who will bear the brunt of the new tax.

In 2022, BIR Commissioner Lilia C. Guillermo announced the bureau’s resolve to collect taxes from prominent social media influencers, online sellers, and online businesses.

This article is published on BitPinas: Diokno Says Withholding Tax from Online Sellers for Fairness

Sources: ABS-CBN, GMA

Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.

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