DOF looks into digital service tax to capture unpaid VAT

The Department of Finance (DOF) is looking into the proposed tax scheme on digital services to plug the leakage in the collection of the 12-percent value-added tax (VAT) on some online-based businesses.

Improved tax administration and possibly a new levy on digital services are “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 told the Inquirer.

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

As such, Salceda suggested to tap 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 the neighboring country—just like the Philippines—experienced a surge in online demand amid the COVID-19 lockdown but also struggled with tax collections due to the pandemic-induced economic recession. INQ