Retailers want physical goods sold on online platforms be slapped with the 12% value added tax.
MANILA, Philippines — An association of retailers is urging the government to impose value-added tax (VAT) on physical goods sold on e-commerce platforms like Lazada, Tiktok and Shopee to level the playing field with brick-and-mortar stores.
Philippine Retailers Association (PRA) president Roberto Claudio told the Inquirer on Friday, March 14, that a significant portion of digital sales consisted of transactions involving physical goods. Yet he lamented that many of these remained untaxed, putting brick-and-mortar retailers “at a disadvantage.”
“The majority of e-commerce sales transactions involve physical goods through platforms like Shopee, Lazada and TikTok,” Claudio said, emphasizing that the current tax structure was creating an “uneven” playing field.
He said that while brick-and-mortar retailers were complying with VAT and other tax obligations, many online sellers, particularly those operating cross-border, were able to bypass these levies.
Under the Bureau of Internal Revenue (BIR) Revenue Regulation No. 003-2025 issued on Jan. 16, the sale, supply and delivery of physical goods from foreign territories are excluded from VAT on digital services.
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Claudio argued that the current tax regime was also resulting in “significant” revenue losses for the government. With the rapid growth of the digital economy, he stressed the importance of revising tax policies to ensure fair competition while boosting government revenues.
Claudio cited a 2024 report from Google Philippines and Bain & Company, which estimated the country’s digital economy reaching a gross merchandise value of $31 billion.
He pointed out that with such a substantial market, taxation policies must evolve to capture lost revenues from online sales transactions.
READ: Consumer rights groups reject new VAT law on digital services, goods
‘De minimis’ rule
The PRA official also suggested revisiting the country’s de minimis rule, which currently exempts imported goods valued at P10,000 or below from duties and taxes.
He argued that this policy, while intended to ease trade and logistics, has inadvertently allowed foreign e-commerce players to sell products tax-free, while local businesses remain subject to VAT and other regulatory fees.
“There is a need to reassess whether the de minimis threshold is still appropriate given the changing retail landscape,” Claudio said.
Beyond taxation concerns, Claudio highlighted the resilience of the Philippine retail sector despite economic challenges.
He expects the local retail industry to grow between 5 percent and 10 percent this year, reaching an estimated P5 trillion in gross value. This growth, he said, would be driven by consumer spending recovery, expansion of shopping malls and the rise of omnichannel retail strategy that integrates physical stores with e-commerce platforms.