With the 1% withholding tax on online sellers already in effect, there is potential that the said tax could address revenue leakages, according to a BusinessWorld news article.
To put things in perspective, posted below is an excerpt from the BusinessWorld news article. Some parts in boldface…
THE GOVERNMENT should ensure that it will be able to properly implement and monitor the collection of withholding tax on online sellers.
The Bureau of Internal Revenue (BIR) recently issued Revenue Regulations (RR) No. 16, which imposes a withholding tax on the gross remittances made by electronic marketplace operators and digital financial service providers to merchants.
Analysts said that the implementation of the withholding tax on online sellers will allow the BIR to better track transactions in the digital economy.
“The implementation of a 1% withholding tax on online sellers is intended to expand the tax base by addressing potential revenue leakages in the growing online retail industry,” China Banking Corp. Chief Economist Domini S. Velasquez said in a Viber message.
“Ideally, the withholding tax system should streamline the tax payment process for online sellers and should have no substantial impact on prices under the assumption that retailers are paying correct taxes,” she added.
Eleanor L. Roque, tax principal of P&A Grant Thornton, said that the measure provides the BIR an additional mechanism to “ensure that taxes are paid by the business owners since their income will also be reported by their withholding agents.”
Ms. Velasquez noted that the imposition of the withholding tax may also mitigate some instances of noncompliance by online sellers.
“This measure is expected to increase government revenues and promote transparency among companies engaged in online retail trade,” she added.
Ms. Roque said that the tax will be an “additional administrative burden” on electronic marketplaces.
“These entities will have to put controls in place to identify remittances to online sellers that are subject to withholding taxes,” she said in a Viber message.
Under BIR regulation, a withholding tax of 1% will be imposed on one-half of the gross remittances by e-marketplace operators and digital financial service providers to the sellers or merchants for the goods and services paid or sold through their platforms or facilities.
However, the tax is not imposed if the annual total gross remittances to an online seller for the past taxable year has not exceeded P500,000; if the cumulative gross remittances to an online seller in a taxable year has not yet exceeded P500,000 or if the seller is duly exempt from or subject to a lower income tax rate pursuant to any existing law or treaty.
The regulation covers marketplaces for online shopping, food delivery platforms, platforms to book lodging accommodations, and other similar online service or product marketplaces.
Let me end this piece by asking you readers: What is your reaction to this recent development? Do you think the withholding tax on online sellers will solve government revenue leakages?
You may answer in the comments below. If you prefer to answer privately, you may do so by sending me a direct message online.
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