BIR to online vendors: Start paying taxes

MANILA, Philippines - Internal Revenue Commissioner Kim Henares is calling for the establishment of a comprehensive taxation policy framework for global electronic commerce amid the astounding growth in online retail spending.

During the International Tax Forum held in Makati last week, Henares noted the urgent need for a fresh tax regime for global e-commerce companies as shoppers are increasingly turning to the web to buy the things they need.

Henares said the new set of international standards should allow governments to tax the digital economy, a move aimed at increasing transparency and curbing tax evasion.

The rise of e-consumer business and the  growth of cross-border transactions have resulted in a shrinking corporate tax base.

“In e-commerce, it is possible for someone to pay no tax at all, thus failing to contribute to nation-building,” Henares said.

 She said there must be a rule that will leave little room for multinational companies to avoid paying taxes.

The BIR chief said the Organization for Economic Cooperation and Development (OECD) is preparing a report that seeks to address e-commerce tax issues that have fundamentally changed global business.

Henares said e-commerce poses a new challenge to taxmen across the globe as its activities impact differently the economies of countries.   It has become a complicated issue as the logistics, geographical  location, consumption may take place in different parts of the world.

Another major enforcement issue is identifying the state or  country that has tax jurisdiction over income generated by electronic transactions, Henares said.

Electronic commerce permits someone to engage in multiple business transactions with customers in several countries without ever having to enter one of them.    

Based on studies, the US is the world’s largest e-commerce market followed by China.

The rapid expansion of digital commerce has been more apparent in Asia with China leading the way given an increasingly affluent middle class which have embraced digital technology.

The strong growth in online transactions in India and Indonesia is also expected to boost Asia-Pacific’s growth.

“E-commerce should be taxed but it must be taxed fairly.  We cannot remain oblivious to the potential revenues that can be derived from taxing the digital economy,” Henares said.