Solon warns vs imposing 1% withholding tax on online sellers by December

House Committee on Ways and Means Chairperson Joey Salceda on Monday cautioned the Bureau of Internal Revenue (BIR) against its plan to impose a 1% withholding tax on online sellers as the policy did not stand on solid ground without legislation and comprehensive consultation.

“It would be better if they wait for the law to be passed. Because before you collect taxes from the people, you need to listen to them first. They will do it (1%) through Executive Order or RMC (Revenue Memorandum Circular), but there is already a bill that passed the crucible of public opinion in the House when it comes to taxing digital services, and that is pending in the Senate,” Salceda said.

He was referring to House Bill 4122 which imposes a 5% Value Added Tax (VAT) on registered nonresident digital service providers providing services to the government and 12% for the rest.

“They should wait for that to be passed so their mandate will emanate from the House,” Salceda added.

Salceda suggested that before imposing taxes on online sellers, there should first be a comprehensive discussion on why there should be a separate taxation scheme for online sellers as compared with those with physical shops that are already paying tax dues.

“People should understand that those with physical stores are affected by the emergence of goods being sold over digital platforms and that it could be unfair if only those with physical stores are being imposed with tax dues,” Salceda said.

“And we cannot clamp down on one sector of our economy when there is nothing to gain at the end of it all. So, it would be better if any measure on that will be done via legislation,” Salceda added. — DVM, GMA Integrated News