What are the Legal Outcomes of Receiving a Tax Summons? A Seller’s Dilemma

Nevertheless, BIR’s Guballa wants to encourage small sellers to register. Tsai says this will help the government capture the information for “census” purposes. “Our gross domestic product is probably a lot understated because we have all these businesses that are not registered.”

Speeding up the process

Speeding up the process

Before, the BIR used to require small business owners to submit a registration certificate from the Trade Department, as well as a mayor’s permit from the local government unit. Today, a BIR application can be processed simultaneously with the mayor’s permit, simplifying the process for business owners.
Besides, a chatbot service for the registration, filing and payment of taxes via Facebook Messenger is due to be launched soon, says Tsai.

Not everyone agrees that cost is the major factor holding back entrepreneurs from filing taxes. Taxumo’s Arboleda points out how businesses are worried about the amount of paperwork tax regulations bring. Not to mention the need to queue up at government offices to secure permits.

But the BIR has made strides in streamlining the process, Arboleda shares. Apart from allowing ESTPs like Taxumo to file on behalf of taxpayers, it cut the steps for applying for a BIR registration.

‘Nothing is certain but death and taxes’

Offshore merchants and digital services are of particular interest. Lawmaker Joey Salceda has filed a bill before Congress looking to impose income tax and VAT on these foreign players.

He alleged that offshore sellers have been engaging in “online smuggling” by evading VAT. If passed, the bill will make Lazada and Shopee withholding agents to ensure VAT is paid.

A part of Lazada’s short statement sent to us reads, “We are providing industry feedback with regards to provisions of the bill that would benefit all parties and sustain the growth of [small businesses] in the digital economy for the long term.”

The Philippines isn’t alone in this sentiment. Singapore and Malaysia this year started to levy sales tax on foreign tech firms. Indonesia followed suit just this month.

What’s more contentious though is Salceda’s plan to levy income tax on offshore firms. Salceda notes this could be done by requiring the firms to have a resident agent or representative office in the Philippines.

There are some tech companies that have established local entities already. Like Lazada and Shopee, as well as ride-hailing company Grab.

The buck doesn’t stop at Southeast Asian shores though.

France has enacted a law to allocate more of monopolistic tech firms’ profits to its territory. The US is contesting the measure—it wants to avoid a patchwork of unilateral taxes while the Organisation for Economic Cooperation and Development (OECD) determine how to overhaul the corporate taxation system for the digital age.

Philippine Finance Secretary Carlos Dominguez III says they’re closely watching the progress of the OECD talks. The plan is to immediately adopt tax reforms if and when there’s an agreement.