Payments

Proposed Bill to Tax Digital Transactions a Major Stumbling Block for Adoption

Fintech Alliance.ph, a coalition of fintech and digital companies, has tagged a proposed bill in the House of Representatives to tax electronic transactions as a major stumbling block to the digital transformation of the country.

The House Bill 6765 or the Digital Economy Taxation Act of of 2020, authored by House of Representatives ways and means committee chairman Rep. Joey Sarte Salceda, shall amend the National Internal Revenue Code “to better capture value created into the tax system”.

Key provisions in the measure include “network orchestrators” that link customers to service providers and leasers becoming withholding agents for income taxes, clarifying that services rendered electronically, digital advertising and subscription-based services are liable to value-added tax, and requiring foreign business who render digital services in the Philippines to work through local agents or offices.

Fintech Alliance.ph says these disincentives will deter digital learning, innovation, and future-readiness of the Philippines.

The coalition added that the government should instead reward micro and small and medium enterprises for moving their products to online platforms if the bill comes to pass.

Other proposals include a phased approach for imposing value added taxes to domestic content or domestic online platforms and taxation to the advertising income of digital platforms of foreign publicly listed companies that have digital presence in the Philippines being subject to international tax treaties.

Lito Villanueva

“We fully understand that taxation is the lifeblood that sustains and nourishes every government. But we are likewise aware of its power to destroy emerging digital enterprises that are still at an embryonic stage in the Philippines. It takes sustained capital intensive investments and infinitely lot of time before digital goods and services become profitable.

The goal for a digital venture is to simply gain user scale and adoption with little regard to revenues and hope to bridge the chasm between the early adopters and the early majority of consumers and providers alike, to make the digital product viable.”

said Lito Villanueva, Chairman of Fintech Alliance.ph.