How do online stores begin to pay taxes?
That, Tax Management Association of the Philippines (TMAP) President Maria Lourdes Lim told SparkUp, is among the many problems faced by online businesses today. “If I were a small business, I wouldn’t have the capability to hire my own accountant who’ll have to do all the calculations for me to comply with my tax requirements,” said Ms. Lim, an online shopper herself. The compliance of small businesses, she says, should be different from that of bigger businesses. TMAP works with the Department of Finance (DoF) and the Bureau of Internal Revenue (BIR) in coming up with policies that would make it easier for people to pay taxes.
But for the part of the BIR, she admits: “they don’t have the manpower to monitor and ensure that all businesses are registered and complying with their tax requirements.”
Currently, she says, the government treats businesses going online as just “another mode of doing business”. The government currently treats Instagram shops that sell hard‑to‑find lip kits the same way as it would a sari‑sari store.
Yet the government recognizes the need to assist online businesses.
“We live in the digital age and the government needs to adapt to the times. We need to provide a platform for the new wave of startups and e‑commerce enterprises, in order that they may thrive while contributing to the country’s economic growth,” said Representative Dakila Cua (Quirino, lone district) in a mobile message to SparkUp. Mr. Cua is the chair of the House committee on ways & means, where all tax laws come from, and principal author of House Bill 4774 (HB 4774), a tax reform package based on the proposal of the DoF which would among other things lower personal income tax rates in a way that would exempt low income earners including fresh grads in entry‑level jobs, and increase the threshold for the VAT requirement for businesses.
The reform bill, if passed in its current version, would mean that online business owners won’t have to pay their taxes until their yearly earning hits ₱3 million, which gives them enough time to decide whether or not they need to rope in an accountant into the business. But that’s not all.
“We’re lobbying so that the threshold might possibly be raised to ₱5 million,” Ms. Lim said, which is based on the experience of TMAP and its members, all of them having tax as their area of expertise. “We and the government are doing the reform so that taxpayers would be encouraged to comply with their tax requirements. We’re also working with the BIR to simplify tax returns.”
All‑in‑all, the government is working with experts to make things easier for small online businesses to pay taxes and be responsible citizens in the Philippines.
“Some people say ‘the government’s just going to use our money for corruption’ as a reason to not pay their taxes. But that doesn’t justify it,” said Ms. Lim. Not to mention that tax evasion is illegal. The government needs money to operate, just like we need money to survive. “Paying taxes is not a right, but an obligation,” she added. “We all must do our part in nation building.”