The Good And The Bad Of Taxing The Internet Sales

Plans to tax online traders is again in the news after the Bureau of Internal Revenue made a pronouncement that people who do business on the web will be subjected to tax. The initial reaction of traders is why, for online advocates taxing online sales will be a deterent to the ebusiness economy. To me, my quesiton is simple - HOW?

As the title suggest, imposing taxes on online sales will have its good and bad implications. Its very easy to determine the good side of it - additional revenue for the government. More revenue to fund worthy projects that will benefit the Filipino people in the area of education, housing, food, and others. I would like to reiterate what I just said - worthy projects and not pockets.

Another good thing going for online taxation is it evens the playing field to those who are doing big business on the web. There are those who are making millions by doing business online, much bigger than those who are doing business in the real world, and yet escape their tax responsibilities because internet transactions are not monitored so its very easy for them to getaway with it.

So I am for online taxation IF the taxes will be collected correctly and online taxes will be implemented fairly. If one of these conditions will not be met, then I will jump ship and will say NO to taxing internet sales. Why? For obvious reasons.

First of all, collecting taxes has been a big problem not only in the Philippines but all over the world. I don't think there's a magic formula ever invented yet to make sure that taxes are collected correctly. There are those who are willing to pay and there are those who just won't pay. And I must commend the efforts of the current BIR chief - Commissioner Kim Jacinto-Henares in making sure the big fishes are caught. But one person is not enough, not even the entire bureau is enough.

Now comes the challenge of taxing internet sales. There are three online classifications you can find on the web: one is B2C- business to consumer (online stores selling products to final consumers); second is C2C - consumer to consumer and; third is B2B- business to business (job recruiting, online advertising, credit, sales, market research, technical support, procurement and others).

Among the three, the C2C is the hardest to monitor. As the name implies, the transaction is between a consumer and another consumer. Transaction in a C2C varies - it can involve selling of second hand gadgets, homemade pastries, clothing, and practically anything one wants to sell. Now how can one monitor transactions like this? Payments are made in various ways like direct bank deposits or cash payments. Transactions that are based on pure trust and guts. The business nature is very personal. How can we tax transactions like this? How do we monitor them? Not to mention of course that most of these transactions comes with little revenue. So are going to tax the smaller ones and let the bigger fish go scot-free? A familiar situation?

Another challenge is the very nature of the web wherein its being non-geographic. The seller can be located in another country and the buyer is in another country. The internet is so decentralize that when taxation is implemented, online transactions will be subject to multiple taxation which will have a negative impact for both online sellers and buyers. It is almost impossible to track where this transactions are coming from.

And if online transactions like this cannot be taxed, B2C and B2B traders might just say why are we being taxed when C2C transactions are not. This is what I am referring to awhile ago - it should be implemented fairly. And of course, if in the real world there are tax evaders, it wont be surprised if tax evaders will also exist in the online world - this is what I meant by tax should be collected correctly.

Studies were also made all over the world and the conclusion is that if online transactions will be taxed, one in four would stop buying on the Web which will result to a 30% drop in online spending. Lower sales may result to job cuts - a not so good scenario that may kill an industry that is just starting.

At the end of the day, there would be pro-tax supporters and anti-tax supporters. Pro tax supporters would argue that e-tailers that would be exempted from sales taxes will have a competitive advantage over regular retailers, for obvious reasons - their products and services will be much cheaper than regular retailers. On the other hand, anti-tax supporters would argue that tax imposition will stifle the growth of ebusiness. I won't be surprise if anti-tax supporters even would argue that the Internet should remain a ''global free trade zone.''

For now, I would say its going to be very difficult to achieve a full-proof tax regulation for online transactions. A set of guidelines that will be acceptable to both pro and anti-tax supporters. I would suggest that the bureau study this undertaking carefully and come up with a win-win suggestion for all the players. Until such time, let the ebusiness industry grow some more.

I am logging off. Stay cool and God Bless!


Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • United States seeks access to Philippine bases as part of Asia pivot
    United States seeks access to Philippine bases as part of Asia pivot

    The United States has asked for access to Philippine military bases in eight locations to rotate troops, aircraft, and ships as Washington shifts its forces to Asia and as China expands its military presence in the South China Sea. U.S. Defense Secretary Ash Carter, in a speech in Arizona, has outlined Washington's next phase in its Asia "pivot", deploying its most sophisticated destroyers, bombers and fighters to the region. The Asia "pivot" has already seen U.S. Marines rotating through the …

  • China's island-building to loom large at SE Asia summit
    China's island-building to loom large at SE Asia summit

    China's creation of new island footholds in contested seas will hover over a Southeast Asian summit that has become an annual test of the region's nerve in standing up to its massive neighbour. The South China Sea hot potato drops this year into Malaysia's lap as the rotating chair of the 10 member Association of Southeast Asian Nations (ASEAN) and host of Monday's meeting. ASEAN states Vietnam, the Philippines, Malaysia and Brunei claim parts of the strategic South China Sea, but Beijing …

  • Philippines, China trade accusations over sea threats

    MANILA, Philippines (AP) — The Philippines accused China of aggressive maneuvers against its reconnaissance plane and fishermen in disputed seas where Beijing has stepped up construction of artificial islands, but China reiterated its claim on the strategic waterways. …

  • Indonesia orders execution of Mary Jane, 9 others
    Indonesia orders execution of Mary Jane, 9 others

    Indonesia has ordered preparations for the execution of 10 drug convicts, including Filipina Mary Jane Veloso, as the Philippine government filed yesterday a second appeal for judicial review of the case to save the maid from death by firing squad. The Attorney General’s Office (AGO) of Indonesia released an official letter dated April 23, instructing prosecutors to prepare for the execution of 10 convicts, the Jakarta Post reported yesterday. The execution would be conducted after the …

  • Noy to visit Canada, Japan
    Noy to visit Canada, Japan

    President Aquino will embark on a state visit to Canada in May and Japan in June to meet with his counterparts and promote Philippine interests. Deputy presidential spokesperson Abigail Valte said Aquino accepted the invitation from Canadian Governor General David Johnston to make a state visit to Canada from May 7 to 9. Tied to this trip is the President’s one-day working visit to the United States to meet with potential investors and with the local Filipino community in Chicago, Valte …

  • Business groups back K to 12 program
    Business groups back K to 12 program

    The government’s K to 12 program adding two more years to basic education received support from various business groups yesterday. However, they urged relevant government agencies to deal with issues regarding the implementation of Republic Act 10533, the Enhanced Basic Education Act or K-12 Law. In a statement, business groups led by the Philippine Business for Education (PBEd) said RA 10533 is a milestone piece of legislation that intends to bring the Philippines up to par with the rest of …

  • Happiest nations: Phl ranks 90th
    Happiest nations: Phl ranks 90th

    Switzerland is the happiest country in the world, while the Philippines placed 90th, according to a global ranking of happiness unveiled in New York on Thursday. Switzerland was followed closely by Iceland, Denmark, Norway and Canada. The 2015 World Happiness Report is the third annual report seeking to quantify happiness as a means of influencing government policy. The United Nations published the first study in 2012. …

  • Asean leaders want binding sea code with China
    Asean leaders want binding sea code with China

    Southeast Asian leaders will seek to speed up plans for a binding code of conduct with China governing behavior in the disputed South China Sea at a summit next week, Malaysia’s foreign minister said Friday. Foreign Minister Anifah Aman said a massive flow of Muslim Rohingya refugees from Myanmar to neighboring countries will also be discussed at the two-day summit of the 10-member Association of Southeast Asian Nations, which starts Monday. Anifah said leaders are expected to raise concerns …


Should Aquino be held accountable over the Mamasapano operations?

Poll Choice Options