House panel OKs bill imposing VAT on foreign-based digital services

A committee at the House of Representatives on Wednesday approved a proposed measure imposing value added tax (VAT) on non-resident digital service providers.

During a hearing, members of the House Committee on Ways and Means approved the motion for approval made by Nueva Ecija Representative Ria Vergara.

"This will level the playing field," said Albay Representative Joey Salceda, the panel's chairperson.

"These companies earn income here and are paying taxes in their home countries," he added. "I want to get our share of that. Otherwise, it would be disadvantageous to our local digital service providers which pay VAT."

Salceda said the VAT on non-resident digital service providers is expected to raise P9 billion in government revenues.

But for Gabriela party-list Representative Arlene Brosas, taxing such consumption-based services would also mean additional expenses to consumers.

"This (VAT) will be passed on to the consumers, and that is why we prefer that we tax corporations rather than consumption-based services," Brosas said.

Salceda responded that these service providers "are already passing it on now when they pay VAT in other countries."

HB 53

Meanwhile, the same House committee also approved House Bill 53, which seeks to ease the process in paying taxes by providing for a medium taxpayer classification.

The bill also provides for a corresponding Bureau of Internal Revenue (BIR) special unit to capture and safeguard at least 90% of the country's tax collections from medium and large taxpayers.

It also mandates the Bureau of Internal Revenue to ensure the creation of registration facilities for non-resident taxpayers, removes the required annual taxpayer registration fee payment of P500, provides for a Taxpayer's Bill of Rights, and creates a Taxpayers' Advocate Office.

"The tax administration efficiency resulting from the passage of this measure will yield an estimated P73.1 billion additional revenues over a period of five years," Salceda said in his explanatory note on the measure.

"We also expect to reduce opportunities for corruption and improve taxpayer experience through the modernization of tax administration procedures." —KBK, GMA News