Retailers support VAT on digital transactions

By Jenina P. Ibañez, Reporter

PHILIPPINE RETAILERS are calling for the immediate approval of a bill that would impose a 12% value-added tax (VAT) on digital transactions in the country as the industry sees increasing competition from foreign e-commerce companies that are not subject to local taxes.

The Philippine Retailers Association (PRA) in an e-mail on Saturday said the lack of taxes on foreign e-commerce firms has created an unfair playing field for retailers and distributors registered in the Philippines.

“While we pay VAT and customs duties, foreign sellers on digital platforms are able to get their products or services to the customers on a door-to-door basis without tax and Customs laws,” PRA Vice-Chairman Roberto S. Claudio said.

The industry group’s objections are directed at foreign online sellers that are able to deliver goods to the Philippines without being registered in or having business operations in the country and do not pay proper Customs duties and VAT.

Such foreign online retailers, he said, are able to sell to the local market without bringing in foreign investment or local employment.

Mr. Claudio is calling on the Department of Finance to validate the sales revenue of online foreign transactions.

“The retail industry will eventually lose revenue for the uneven playing field, competing with foreign online suppliers who do not pay (duties according to) our Customs laws. Eventually, government tax revenues from (local) retailers will be reduced over time,” he said.

The House of Representatives last week approved House Bill No. 7425, which amends sections of the National Internal Revenue Code of 1997, on third and final reading.

Gabriela Party-list Rep. Arlene D. Brosas voted against the approval of the measure, saying it is a tax burden on ordinary Filipinos who are struggling amid the prolonged pandemic.

In supporting the tax measure, PRA’s Mr. Claudio also recommended that “strong” implementing rules and regulations would be drafted to make sure that all digital transactions have receipts. He cited issues surrounding counterfeit products, false advertising, and product warranties have continued to persist.

“The bill can be further refined and this can be addressed in the (Implementing) Rules and Regulations as to who can be exempted. How it will be monitored and how compliance can be achieved, as well as penalties to be imposed,” he said.

PRA last month asked for expedited vaccine deliveries as the industry loses sales and cash reserves after three major lockdowns declared to curb the spread of the coronavirus pandemic.