Tax on online sellers should be fair to all

The move to tax online sellers has been the talk of the town lately.

While online selling used to be a mere stop-gap income-generating measure for families who need to make both ends meet, some online sellers have now flourished into big businesses that compete directly with traditional brick-and-mortar enterprises.

Nothing wrong with the growth of online selling or e-commerce. It increases economic activities and boosts the income of the sellers.

However, the problem lies in the principle of fair competition and their obligation to the government.

Most online sellers are unregistered with the Bureau of Internal Revenue (BIR), thus, not subject to taxes and government regulatory measures. On the other hand, brick-and-mortar businesses are assessed taxes because they are registered and within the ambit of government regulatory measures. Aside from this, they pay the rent for their physical stores and other incidental fees that come with it. There lies the difference.

In a bid for equitable application of the law, the Department of Finance (DOF) said online sellers should be subject to the same tax obligation as traditional businesses.
The BIR is proposing a new rule that would require online platform providers — such as Lazada and Shopee — to withhold one percent of the amount they pay to their partner online sellers or merchants. This withholding tax would be applied to half of the total amount being remitted.

“It’s not only increasing tax revenues, it’s a matter of fairness. A good tax system should be fair. That should be one of the characteristics of a good tax system, fairness,” the DOF said to explain the need to tax online sellers.

But consumers’ groups opposed the plan to tax online sellers.

The United Filipino Consumers and Commuters (UFCC) said the tax measure is anti-poor as it will affect a number of Filipinos who rely solely on online business to survive after suffering the impact of the Covid-19 pandemic.

Like UFCC, the Digital Pinoys Movement said the move will hurt small online sellers the most.

“The imposition of one percent withholding tax on e-commerce merchants will hurt small online sellers the most. This is a burden for them and should not be imposed. This digitax will push back the opportunities presented by online selling, which has transformed into the main livelihood of many Filipino families,” Digital Pinoy said. “This new tax may do more harm than good as it will have a chilling effect, especially on micro, small and medium businesses (MSMEs) that maximize digital technology. It will heavily affect the government’s digitalization campaign for businesses. We may see fewer digital MSMEs if the additional tax pushes through.”

Both the government and the consumers’ groups have valid points.

It’s now up for the government to strike a balance between its obligation to collect the correct taxes and its social responsibility. Some resort to online selling just for survival, not for profitable business.

Perhaps, the government could set a cap to determine who should be subject to tax. Those below the set threshold should be exempted from paying taxes.

We look forward to a win-win solution here so both the government and the online sellers will reap the benefits of this flourishing e-commerce.

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Credit belongs to: www.mb.com.ph