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Dominguez plans to tax cross-border digital deals

The government plans to propose a taxation scheme on cross-border digital services transactions to capture income tax once an international agreement is reached, Finance Secretary Carlos Dominguez III said Wednesday.

Dominguez’s statement came in the wake of report that the US government was investigating the digital services taxation scheme of countries like Great Britain, the European Union, Indonesia, Turkey and India.

Such taxation scheme, as claimed by the US, was aimed at American technological companies like Google, Apple, Facebook, Amazon and Netflix.

“We are aware that several tax administrations have started to impose digital services tax even when countries have yet to agree on how to reallocate income taxation rights on cross-border digital transactions,” Dominguez said in a statement.

“We are constantly monitoring developments on this matter. Once an international agreement is reached, we will immediately study and propose tax reforms to capture income tax on cross-border digital transactions,” Dominguez said.

For now, he said, the government was focusing on efforts on collecting value-added tax on both local and cross-border digital transactions, similar to what the other Southeast Asian countries were doing.

“The DoF and the BIR are currently crafting regulations and designing a system to effectively collect VAT on digital transactions to help the government raise revenues,” he said.

He also welcomed Rep. Joey Salceda’s proposed bill on digital tax, specifically on his proposed amendments to the VAT Law.

He clarified once an international agreement on cross-border digital transactions was reached, and in case it passed into law in the Philippines, the digital services tax would be on top of the VAT/consumption tax.

Earlier, Salceda filed a tax bill to better capture the value created by the digital economy in the country’s tax system, and plug loopholes caused by ambiguities as to what kind of taxes digital services are liable to.

Salceda said the bill aimed to simplify the tax collection procedures in the digital economy. It will make e-commerce platforms like Lazada as withholding agents for VAT on imports from its sellers, mostly based abroad.

The tax measure―HB 6765 titled An Act Establishing a Fiscal Regime for the Digital Economy―is estimated to yield as much as P29.1 billion annually in incremental revenues. It seeks to amend Sections 57, 105, 108, and 114 of the National Internal Revenue Code.

Topics: taxation scheme on cross-border digital services , Finance Secretary Carlos Dominguez III
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