18th Congress 2nd Regular Session #07 Part 3 Transcription
September 16 2020
Salceda Digital Taxation Sponsorship Speech
-Start at 18:00 minutes-
Session Resume.
The Majority Floor Leader
Majority Floor Leader: Mr. Speaker I move to begin consideration of House Bill 7425, as contained in committee report 426. Could the Secretary General be directed to read the title of said measure.
Secretary General: House Bill 7425 an act imposing Value Added Tax on digital transactions in the Philippines, amending for the purpose, section 105, 108, 109, 110, 113, 114 and 236 and adding a new section, 105-A of the National Internal Revenue Code of 1997 as amended.
Majority Floor Leader: Mr Speaker I move that you recognize for his sponsorship speech our esteemed Chairman of the Committee on Ways and Means, from the second district of Albay, I move for the recognition of the honorable Joey Salceda.
The honorable chairman of the Committee of Waste and Means is hereby recognized. Please proceed.
Salceda: Good afternoon, thank you very much honorable speaker, members of the house of representatives. Committee Report 426 on House BIll 7425, aims to fuel our government by doing the right thing for four reasons; first the implementation of VAT and digital transaction does not aim to impoverish small online sellers. There are enough safety nets in the tax code and other laws.First,those exempt who are earning 3 million or selling below 3 million are exempt from paying VAT; those who actually have assets below 3 million are also exempt. Those who import below 10 thousand are considered de minimis and therefore not subject to VAT. And those that are earning 250 thousand per year are also. We are after big businesses who are unfairly raking it in. Facebook and Google make 57 billion in this country, and pay not a single cent of tax.
Second, the measure seeks to level the playing field between the traditional and digital businesses, and maintain the integrity of the tax system by clarifying the imposition of VAT on digital service providers. While the said role of information and communication technology in nation building has been recognized as early as 2000 with the passage of the Electronic Commerce Act, that was my first term in congress. The tax on online transactions must have the force of law for it to be optimized.
Third, the legislation of composition of tax on digitized economy is a global practice, thus far 77 countries have enacted legislation on indirect taxes with 10 more in the process of formulating their own. With the approval of this measure, we are joining the ranks of nations who chose to share the benefits of the flourishing digital economy for the greater public. We are proud to note that the KPMG reports that this measure is aligned with the guidelines set by the OECD in digital taxation.
Fourth, the government will lose out if it fails to tap this new source. The measure will result in an estimated revenue of 31 billion the first year of implementation, 62% of which will come from foreign digital service providers. It is only fair that those who make money from Filipino consumers should carry some burden of government. Mr. Speaker, your honor, our internet economy is growing at more than 20% to 30%, estimated at $7 billion in 2019. The internet economy or digital economy makes up 2.1% of the country’s GDP and is expected to hit 5.3% of GDP by 2025. This will only keep growing and the economy will increasingly become more digital. Just like the 77 countries, let us set the ground rules clearly and this early, so that we will not have to make more painful and difficult choices in the future.
Mr. Speaker, on average, Filipinos spend 10 hours a day on the internet with 73 million users in the country. Social networking and online shopping and gaming spending 93 billion in 2019. We have a huge taxing opportunity before us. This means measure, however has been tempered in order to conform with the current practices across the world, although originally it was meant to secure 31 billion. This measure is more reasonable by merely focusing on VAT, rather than including income tax, or the domicile – or forcing the domicile of global digital companies. So Mr. speaker, that 10 billion may look small now, but with this growth of 30%, it will certainly be a big component of the entire economy as well as our revenue mix. The Committee of Ways and Means were tasked to find funds, as per direct instruction of our speaker, during the opening of the first appropriation cycle. In order to fund a new stimulus package beyond Bayanihan 2, we offer this VAT as the first installment – this VAT on online transactions as part of the solution to our countries efforts to recover more quickly, more meaningfully and more broadly from the adverse impact of COVID 19. Thank you Mr. Speaker, your honor. I humbly seek the immediate approval of this measure. Thank you very much.
-Ends at 25:09 minutes.-
-End of Salceda’s Sponsorship Speech-