DOF: Slow digitalization to result in tax losses amid e-commerce boom

The Department of Finance (DOF) has warned that the government’s slow implementation of digitalization amid the rapid growth of e-commerce could result in significant revenue loss.

In a statement, the DOF said that Finance Secretary Ralph G. Recto is now seeking additional funding from the Asian Development Bank (ADB) to support the government’s digitalization program.

Recto explained that the digitalization program is critical, especially since many Filipino consumers have already transitioned to e-commerce.

Bureau of Internal Revenue (BIR) Commissioner Romeo D. Lumagui Jr., earlier said that the agency was focusing on improving tax collection from online sellers and other new platforms.

The pandemic has compelled many entrepreneurs to shift to online selling, utilizing several e-commerce platforms. It is now estimated that around two million entities are operating as online in the country.

In 2022, the digital economy of the Philippines amounted to P2.08 trillion, contributing 9.4 percent to the country’s gross domestic product.

The DOF said that ADB committed to closely collaborate with the government on the proposed Digital Transformation Project for the BIR, as part of its support for the country’s tax reform initiatives and domestic resource mobilization efforts.

Since January, the BIR has imposed a one percent withholding tax on online merchants who are benefiting from the rapidly growing e-commerce industry.

However, the BIR has exempted online sellers with yearly gross remittances under P500,000 or cumulative gross remittances below this limit. — Chino S. Leyco