TAXING the digital economy could yield up to P17 billion in fresh value-added tax (VAT) revenue in the first year of implementation, the Department of Finance (DoF) said.

Finance Assistant Secretary Maria Teresa S. Habitan told BusinessWorld that the DoF estimates incremental revenue of between P14 to P17 billion from 12% VAT charged on online transactions.

“What is assumed is that if the proposal is legislated, on the first year of implementation the incremental VAT revenue could be between P14 billion to P17 billion,” Ms. Habitan said in a mobile phone message.

On Wednesday, Finance Secretary Carlos G. Dominguez III told Senate leaders that the DoF and Bureau of Internal Revenue (BIR) are currently studying how to collect taxes from transactions online to plug potential VAT leakages.

“What we are trying to figure out is how to implement a tax collection program, right now our team from the BIR and the DoF is working very hard to determine the way to tax transactions that are supposedly taxed, but are escaping taxation because they are on the Internet,” Mr. Dominguez said.

He noted that buying a floor polisher from a traditional store is charged VAT while those sold online are not charged.

He said DoF is also looking at how to tax streaming services.

“We are figuring out how to do this… we will report to the Senate as soon as we have a viable way of taxing,” Mr. Dominguez added.

Ms. Habitan said the DoF used 2019 data in arriving at its preliminary estimates, but House Ways and Means Committee Chairman and Albay Representative Jose Maria Clemente S. Salceda “has a more concrete proposal on this.”

Mr. Salceda has filed House Bill No. 6765 or the Digital Economy Taxation Act, seeking to impose 12% VAT on advertising, subscriptions and transactions made via e-commerce platforms.

The bill estimates around P29.1 billion in fresh revenue for the government each year, broken down into P9.7 billion from e-commerce platforms that will serve as withholding agents for VAT, P4 billion from online advertising, P2.9 billion from other digital services such as games and around P2.2 billion from subscription-based services like music streaming, video streaming, and electronic publishing services.

In its previous proposal in early this month, DoF estimated VAT revenue from the digital economy could hit P15 billion in 2021, P16.6 billion in 2022 and P18.4 billion in 2023. — Beatrice M. Laforga