The Department of Finance (DOF) said the government will look into possible tax reform measures to capture income tax on cross-border digital transactions once an international agreement is reached but, until then, the focus will be on collecting value-added tax (VAT) on online transactions.
“We are aware several tax administrations have started to impose digital services tax even when countries have yet to agree on how to reallocate income taxation rights on cross-border digital transactions. We are constantly monitoring developments on this matter,” DOF Secretary Carlos Dominguez told reporters yesterday through Viber.
“Once an international agreement is reached, we will immediately study and propose tax reforms to capture income tax on cross-border digital transactions,” Dominguez said.
Dominguez’s statement was in response to recent reports the US government will investigate the digital services tax implemented by several countries.
According to a report by the Economic Times, the US is concerned the tax scheme is designed to unfairly target American tech companies.
“For now, we are focusing our efforts on collecting VAT on both local and cross-border digital transactions, which is similar to what the other Asean countries are doing,” Dominguez said.
Dominguez said the DOF and the Bureau of Internal Revenue are crafting regulations and designing a system to effectively collect VAT on digital transactions to help the government raise revenues.
“In this regard, while we are now focusing on administrative regulations, we still welcome (Albay Rep. Joey) Cong. Salceda’s proposed bill on digital tax specifically on his proposed amendments to our VAT law,” Dominguez said.
