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On the proposed taxation of online shopping

There’s a recent uproar online about the Bureau of Internal Revenue’s announcement that it plans to collect taxes from online retailers soon.

For those who are unfamiliar with the issue, a few background info:

The increasing reach of the Internet has sustained the spread of online businesses particularly retail trade.

Online sellers or retailers are able to sell their goods much cheaper than the brick-and-mortar shops located in malls simply because they have less operating expenses. (No monthly stall to rent, utilities, and no workers to pay to man the shop)

Some of these online sellers are not registered businesses with the government, they simply put up ads online or setup an account in online buying/selling websites for their goods and started making money.

Now, first of all, let it be clear that anyone who does business in the country, or any country, must pay taxes. The grand ideal is that, by having a share of what a business earns, the business owner and the rest of society benefits as well because a government can operate that will protect their interests, provide for basic services like health care, education, public transportation and regulation of business to make sure everyone gets a chance to succeed.

In reality though, many Filipinos see taxes with a grain of salt, some are even infuriated by the fact that they pay taxes but feel that they’re not getting their money’s worth because corruption, the terrible traffic in cities, the tragic state of government hospitals and schools and every time you see a politician in a new 4×4 SUV, complete with body guards riding out of their mansions, you really get that subversive feeling.

With this, one would not be surprised if the BIR plan goes through, many of the online resellers would simply go further underground – close their online shops and use less direct methods of selling their goods on the internet.

This is not to say that online entrepreneurs are tax evaders, or would totally hate the idea of paying taxes. Perhaps if they can see that their taxes would really do good, they’d not hesitate to go legit with their business through and through.

Which brings us to my suggestion. That the taxes collected from online retailers or businesses, be allocated to specific uses like the following:

  • More funding for state colleges and universities with particular bias for supporting science and information technology programs so that we can further advance the application of the Internet and telecommunications technology to the economy.
  • Putting up public libraries with computers that give free access to the Internet. This would encourage more economic activity online, a benefit for online businesses.
  • To improve public transportation and roads so as to make travel more convenient. This would make deliveries of goods ordered online more reliable and on time. This would also encourage meetups between online buyers and sellers.
  • To fund a national government agency that will monitor online business activities – a check on online prices, investigate and mediate disputes about online transactions and protect online consumer rights.
  • To put up funds that prospecting online entrepreneurs can borrow from to put up their own online business.

Of course, these must be guaranteed by law just like how the Sin Tax law specifically allocates funds from the new taxes on cigarettes and alcohol to efforts in helping patients suffering from lung cancer, etc. so that politicians would not have a free hand in spending or allocating funds from taxes levied on online economic activities.

These are just some things I can think of right now. And these are pretty good suggestions if I may so myself. If you have more, do share them in comments section below, or tweet or blog about it.

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