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BIR: Proposed 1% withholding tax on online sellers ‘not a new tax’

Amid calls to reconsider its plan to impose a creditable withholding tax of 1% on the partner-merchants of online platforms, the Bureau of Internal Revenue (BIR) said the proposal is not a new tax as it is within existing tax laws.

“The proposal is a creditable withholding tax. So it’s not really a new tax. It’s just a mode of collecting,” BIR Commissioner Romeo Lumagui Jr. told reporters at the sidelines of The Economist Impact’s Global Anti-Illicit Trade Summit in Taguig City on Thursday.

The United Filipino Consumers and Commuters (UFCC) is urging the BIR to reconsider its plan, describing it as a “heavy blow” to “ordinary Filipino people who will suffer the effects of the new tax."

In its proposal, the BIR is eyeing to impose a creditable withholding tax of 1% on one-half of the gross remittances of online platform providers to their partner sellers or merchants.

The taxman argued that with the proliferation of online sales transactions through the facilities of online platform providers, there is a need to take advantage of the opportunity to identify sellers of goods and services who are therefore obliged to declare their income resulting from these transactions for tax purposes.

The withholding tax is the amount withheld by a business in payments of goods or services which is directly remitted to the government on behalf of suppliers or employees.

“This is not a new tax. Just like the creditable withholding tax of employees, it’s not a new tax —the tax of employees is being withheld by employers,” Lumagui said.

Amid concerns on the proposal, the BIR chief said the taxman is open to comments and suggestions from stakeholders.

As to when the plan will be imposed, Lumagui said, “We still don’t have a timeline because there are still a lot of issues that need to be addressed.”

“Online sellers should know that they are engaged in business. They should not oppose registration because what we are merely asking is registration. If their revenues are not sufficient or minimal, they don’t need to pay taxes,” he said.

Under the Tax Reform for Acceleration and Inclusion (TRAIN) law, an individual earning less than P250,000 in a year is exempted from withholding tax.

Meanwhile, the UFCC called on President Ferdinand "Bongbong" Marcos Jr. to be "on the side of the ordinary Filipinos in our crusade against new anti-poor tax measures."

The group also called on online selling and services platform providers to be the voice of their partner sellers and merchants in their representation to the BIR.—LDF, GMA Integrated News