Makabayan solons hit ‘regressive’ proposal to impose 12% VAT on digital service providers

The House Makabayan bloc on Thursday denounced the proposal to impose a 12% Value Added Tax (VAT) on some foreign and local companies providing services through digital and electronic platforms, saying it will only put more burden on consumers already hit by the COVID-19 pandemic.

In a virtual press conference, Bayan Muna party-list Representative Ferdinand Gaite described the proposed tax policy as "regressive," as it counters the concept of "those who can afford more should pay more."

"Ibig sabihin yung malalaking multinational corporations, mga oligarchs, yung mga bilyonaryo na karapat-dapat na patawan ng mas malaking buwis, ang sinisingil ay yung mga ordinaryong mamamayan sa pamamagitan nitong online tax," he said.

"Obviously, napaka-desparate itong gobyernong ito na maningil pa ng karagdagang buwis sa naghihirap na mamamayan," he added.

The House Committee on Ways and Means on Wednesday approved the substitute bill for the proposal to amend Section 105-A of the National Internal Revenue with a provision that makes a non-resident digital service provider such as Netflix, Spotify, Lazada, among others, liable for assessing, collecting, and remitting the VAT on the transactions that go through its platform.

Finance Assistant Secretary Daki Napao said that measure could raise P10 billion in revenue for the government, of which P9 billion will come from foreign companies that are based in the Philippines.

But Bayan Muna party-list Representative Carlos Zarate said the expected revenues from the proposed measure is no match with the possible revenue losses from another tax policy being pushed in Congress — proposed Corporate Recovery and Tax Incentives Enterprises (CREATE) Law.

He said that the proposed CREATE Law, which seeks to reduce the corporate income tax to 25% from 30% currently, will result in the loss of P259 billion in government revenues in three years.

"Ang P259 billion as against dito sa kikitain dito sa [digital tax] ay P10 billion. Granting that it's true, that is only P30 billion [in three years], pero ang pinahirapan mo ay ang milyon-milyon nating kababayan lalo na ang mga kabataan, ang ating middle class and even ordinary families that are now suffering even more hardships dahil dito sa COVID-19," Zarate said.

For her part, Gabriela Women's Party Representative Arlene Brosas said the proposal will only pass on higher subscription fees and service charges to consumers availing of these digital services, especially those who will be attending online classes and working from home.

"Pinipilit ng pamahalaan na ito ang online class. Balak nilang pagkakitaan ito. At sa tingin natin kukunin talaga sa mamamayan yung gastos kasi sila naman ang gagastos e. In short, parang tina-tax kunwari yung mga streaming platforms, per yung nagsu-subscribe yung nabubuwisan," she said.

"Kaya ang mas mahihirapan dito, sa tingin natin, yung mga anak na mag-aaral sa kanilang mga bahay, ang mamumroblema nito sa mga napipintong pagtaas ng subscription at service fees kapag naisabatas ito ay yung mga nanay at mga gumagamit at nagttrabaho online," she added.

Instead of imposing new taxes, Kabataan party-list Representative Sarah Elago said the government should fix inefficiencies in the current taxation system in the country.

"Marami pang mga pwedeng kulektahan na hindi nakokolekta dahil sa mga inefficiencies na kasalukuyan pa ring nandiyan sa pagbubuwis dito sa ating bansa," she said.

House ways and means panel chair Joey Salceda, however, clarified that the measure does not seek to burden small businesses and the public but imposes taxes on where it is due.

"This is just a matter of common tax sense. If brick-and-mortar establishments, which are the hardest-hit by the COVID-19 pandemic, have to pay VAT, the giants of e-commerce shouldn’t be exempt. In general, if you sell, you pay VAT, unless you fall under the exemptions for small businesses," he said. — RSJ, GMA News