DOF looks at digital services tax to capture unpaid VAT

Proposals to tax digital services to plug leaks in unpaid 12 percent VAT by some online businesses has caught the attention of the Department of Finance (DOF) which is now looking at the suggestions.

Improved tax administration and possibly new levy on digital services were “something to seriously consider,” Finance Secretary Carlos G. Dominguez III said.

For the DOF, the digital services tax regime should be “able to collect VAT,” Dominguez added.

Dominguez noted that these digital and online marketplaces still have tax leakages resulting in revenue losses for the government.

“It’s really enforcing the VAT to be fair to everyone, whether buying online or buying from the shelf,” acting Socioeconomic Planning Secretary Karl Kendrick T. Chua, for his part, told the Inquirer.

House ways and means committee chair and Albay Rep. Joey Salceda told the Inquirer last Monday (May 18) that among online sellers, only about half, usually large taxpayers and registered enterprises, had been fully compliant with their VAT payments.

As such, Salceda had suggested tapping online sales platforms such as the Alibaba Group’s Lazada, Amazon, and Shopee, among others, to also serve as their suppliers’ withholding tax agents.

Salceda had also proposed slapping new taxes on subscriptions to video and music streaming apps such as Netflix and Spotify, as well as advertisements on social media sites such as Facebook and tech giant Google.

According to reports, Indonesia will impose a 10-percent VAT on foreign-owned digital services as it, like the Philippines, experienced a surge in online demand amid the COVID-19 lockdown but also struggled with tax collections due to pandemic-induced economic recession.

Edited by TSB