Proposed taxation on e-commerce needs further study, experts say

BIR Commissioner Kim Jacinto-Henares: After online sellers. Inquirer file photo

MANILA, Philippines—The government should further study the proposed move to tax online sellers considering the possible adverse impact on local e-commerce, which is still in its infancy.

Experts said during the recent 21st National Retail Conference and Stores Asia Expo that there is a risk that the tax on online sellers will hurt the emerging sector that provides a lifeline for budding entrepreneurs and low-income Filipinos.

According to Jack Madrid, country manager of Multiply Philippines, the well-meaning move—if not executed smoothly—could stunt the growth of e-commerce, which serves as nursery for a new crop of entrepreneurs and potential job generators.

Online transactions make up only about 1 percent of total retail and are mostly made up of occasional sellers, according to experts.

“Do we really want to pour in resources to run after the one percent or even less than one percent? How about the other 99 percent? That is my question, in turn,” Madrid said.

“There are many online sellers just wanting to get rid of old items just to be able to pay tuition (fees), or just to have extra income during Christmas, and that’s it. Tax rulings must be clear for them or we’ll end up hurting them instead of getting the big sellers,” added Meanne Bundalian, senior manager of sulit.com.ph.

Gigi Mabanta, head buyer of Zalora, said the online mall’s “tenants” have well-established physical stores, have official receipts, and are already paying taxes the traditional way so there is no impact on them. As for purely online stores, owners have to understand the tax rules applicable to them to be able to comply.

Janette Toral, a technical consultant of the congressional oversight committee for the e-Commerce Law, has said the Bureau of Internal Revenue must be clear about tax rules for e-commerce.

Otherwise, potential entrepreneurs may be discouraged or become even more reluctant to deal with taxation.

Earlier this month, BIR Commissioner Kim Jacinto-Henares said online sellers on sites such as multiply.com, sulit.com.ph, e-bay Philippines, alibaba.com, ayosdito.ph and even Facebook should be registered, issue electronic invoices, and pay taxes the way entrepreneurs with physical stores do.

The BIR is apparently set to talk to companies running online sites to gain assistance in monitoring online stores.

“Some sellers negotiate directly on their personal Facebook accounts, and if these transactions are done on a regular basis, it would make him or her engaged in business, thus they also have to register and issue the necessary receipts and/or invoices,” Henares said.

Apparently the BIR need not issue a new regulation to crack down on online sellers.

Citing Section 237 of the National Internal Revenue Code, Henares said the law requires the issuance of receipts and lays down penalties for violators.

The government’s main revenue generating body aims to collect P1.066 trillion in taxes for 2012. It has reported P521.159 billion in tax revenue in the first six months of the year, leaving P544.84 billion to be collected until year-end.