Small, mostly home-based online sellers were rattled by the recent announcement of the Bureau of Internal Revenue reminding everyone doing business using the internet to register and pay taxes. The BIR’s June 1 revenue memorandum circular set a July 31 deadline, warning that failure to do so could result in penalties. This instantly triggered protests from small internet entrepreneurs and several lawmakers. The ensuing clarification and explanations from Malacañang and the departments of Finance and of Trade and Industry have failed to quell the public clamor on the looming impact of the BIR directive.
It is true that the BIR is simply implementing a provision requiring the registration of all online sellers contained in a law passed during the previous administration, which sought to bring to the mainstream economy the majority of entrepreneurs thriving in the underground.
It is also true, as the DTI and DOF stated, that registering with the BIR has its perks and other advantages. Online sellers need to register their businesses with the BIR as mandated by law to enjoy government benefits. For instance, registered businesses are entitled to the DTI’s low-interest loan program and may qualify for the government’s small business wage subsidy programs.
Registering will also help protect consumers from scammers and thieves who have managed to come up with ingenious schemes to defraud hapless buyers online. Registration provides traceability, a digital footprint to assign responsibility and accountability. This justification for the BIR registration circular is very timely given the numerous reports of online scams or disputes about items bought and delivered to consumers.
However, such registration should not inflict financial and other costs, especially on small-time sellers and resellers scrounging around for a new source of income after being pushed out of work by the pandemic-induced economic recession. As it stands, a prospective registrant needs to spend much time and money just to comply with the BIR requirements. The circular cites some of these requirements to include the issuance of a registered sales invoice or official receipt for every sale of goods or services to clients, customers, or buyers; having to keep registered books of accounts and other accounting records of business transactions; the withholding of taxes, and filing of required tax returns.
While small retailers need not worry about the tax payment provision in the BIR circular since it is clear that those earning P250,000 and below a year will not be required to pay any tax, the issue is the burden to be caused by the tedious process of registering with the BIR, which also entails costs.
If protecting the consumer is the goal, registration could be done at the DTI and should be kept simple and online, adopting existing techniques that will prevent the use of fictitious names and addresses as well as contact numbers. Online entrepreneurs can also be required to register with their local governments— again using the simplest format and online — especially if they’re selling food that could pose a hazard to the health of the community.
The government may be in dire need of new revenue sources as the lockdowns had severely cut the tax collections of both the BIR and the Bureau of Customs. If so, it should go first after the big names in e-commerce, the likes of Amazon, Lazada, and Alibaba for online commerce, or Netflix, Facebook, and Google for advertising revenues generated in the country. Or even homegrown large online sellers who make millions reselling imported gadgets and yet do not pay taxes.
It should, however, spare the small ones. The biggest help the government can do at this time is to lend support to — and not further burden — ordinary Filipinos who are simply trying to cope with the recession now gripping the country. This is glaringly not the right time to impose another headache on small entrepreneurs striving to survive and finding opportunities in e-commerce. The law requiring registration may be there, but the government can always opt for some leeway, and show greater sensitivity and generosity during this very difficult period for everyone.