PIDS: Digital transactions result in PH’s loss of tax collections

The Philippine Institute for Development Studies (PIDS) has discovered that the Philippines is losing a significant amount of tax revenues due to foreign digital service providers and digital transactions. PIDS’s paper highlights the challenges faced by tax agencies, given the complex nature of digital transactions and the absence of physical presence. As a result, enterprises can easily evade taxes or pay minimal taxes. Emerson Bañez, a law professor at the University of Philippines, recommended extra tax liabilities through a new law that mandates online marketplaces and payment systems to act as withholding agents or providers of data required to determine the tax liability. This law could help the government collect P13.7 billion in value-added tax on digital service providers in 2024, which could increase to P18.2 billion in 2028. Bañez also recommended signing multilateral treaties to counter tax-base erosion, such as the Organization for Economic Cooperation and Development’s Two-Pillar Solution.

 

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