Albay Rep. Joey Salceda has refiled a measure which seeks to include in the coverage of the value-added (VAT) tax law all digital services and goods being sold online, including Netflix, Spotify and online shopping platforms like Lazada.
The measure will raise at least P154 billion in five years.
Salceda, former chair of the committee on ways and means, has filed House Bill No. 372 or the proposed digital economy VAT “to close ambiguities in the VAT system that have allowed some digital services and goods sold over the digital space to remain outside the coverage of VAT.”
“This is not a new tax. We pay VAT for almost al goods and services, except those specifically exempted by law. It goes without saying that the digital economy should be subject to VAT, but we are unable to capture these revenues because of ambiguities in tax laws,” he said.
Salceda expressed hope the measure will be able to provide fiscal space to support digitalization of small businesses, a national broadband network, and jobs centers and training for digital freelancers.
“This bill clarifies that digital services such as digital advertising, subscription-based services, and other online services that can be delivered through the internet as VAT-able.
The measure also aims to strengthen tax compliance through simplified invoicing and registration requirements for VAT-registered nonresident DSPs (digital service providers),” the bill said.
Together with his proposed digital economy taxation service, which could yield another P72.5 billion over five years, Salceda noted that digital economy taxation reforms in tax administration could yield up to P226.5 billion over the medium term.
“Our tax system really needs to catch up to the digital economy, which grows and changes by the day,” said the veteran economist-lawmaker.
Salceda said goods sold online do not need any further legislation to be covered by the law “but I have proposed to the BIR (Bureau of Internal Revenue) that they establish a digital economy taxation service to have a dedicated unit for the growing digital sector.”
Salceda is also considering providing a framework for the taxation of digital assets such as Non-Fungible Tokens, cryptocurrency, and others.
“I will create a technical working group (TWG) on digital asset taxation within the committee on ways and means to study whether these assets can be considered services, and therefore ‘VATable’ or should be taxed differently. I understand that (Finance) Secretary (Benjamin) Diokno also has his own opinions on digital currencies, being from the Bangko Sentral. So, his thoughts will determine much of the direction of that TWG’s work,” Salceda said.
Salceda also seeks to clarify the tax regime for digital gambling by “deputizing a TWG for digital betting and amusements taxation to make recommendations to the committee.
Unlike underground or informal gambling, he said the government “can capture digital gambling revenues through the payment systems employed.”
