MANILA, Philippines — Marie (not her real name) is a 28-year-old housewife from Bicol who sells handmade bags and accessories through the social networking site Facebook.
Just like many women her age, Mariel likes to collect bags, accessories, and other fashion items — a hobby that turned into a business idea, which soon evolved into an online venture.
Today, Mariel re-sells the stuff she bought from other people to the more than 800 fans of his Facebook page, earning additional income for her as she tends to her growing 1-year-old child.
A new drive by the government’s Bureau of Internal Revenue (BIR), however, may soon find Mariel, and other small-time online business owners like her, counting fewer profit at the end of each day, as the agency intensifies its efforts to achieve its collection goals.
The renewed initiative was made public by BIR Commissioner Kim Jacinto-Henares in an InterAksyon report on Tuesday, where she pointed out that a vast majority of these online traders do not issue sales invoices for every transaction, which in turn depletes the BIR’s chance of collecting more revenue from taxable transactions.
“This plan will push through hopefully within the year,” Henares said. “Under the rules, online sellers shall be registered as such to the BIR, and that their electronic invoicing shall likewise be registered either directly to us or a third-party accredited by us.”
Online traders are just the latest sectoral group that the BIR had singled out in recent years as it attempts to reach collection goals. Previously, the BIR had made pronouncements that they would be stricter with self-employed individuals who do not fully declare their incomes when paying taxes.
No sales invoice
Just like majority of online sellers in the Philippines, Mariel doesn’t issue a sales invoice or an official receipt whenever she closes a deal through her Facebook business.
“It’s just a hobby,” Mariel told InterAksyon via a Facebook interview. “I don’t earn enough to bother thinking of paying [taxes] for it.”
The same mindset permeates among majority of online entrepreneurs today, Mariel said, who leverages the social aspects of these online websites in order to sell to friends and co-workers before expanding to a wider audience.
“I’m a housewife, I take care of a kid. Most sellers are like that too — walang magawa, mahilig bumili (nothing to do but likes to shop) , and then you realize you can actually resell some of [your purchases],” she added.
Most online selling venues in the Philippines today are as informal as Facebook, where no payment facility is available for sellers and buyers to exchange money with. The exception is Multiply Philippines, which is slowly offering payment gateways — and thus, requires sellers to issue sales invoices — to its growing number of e-Commerce members.
But not all selling platforms are as sophisticated as Multiply. Take the case of Sulit.com.ph, one of the largest online classified sites and is among the most visited websites in the Philippines. With more than 1 million members to date, the site enables thousands of transactions to be made without money passing through its systems
“As an online classifieds, transactions between buyers and sellers do not happen within the scope of Sulit.com.ph,” explained RJ David, co-founder and managing director of Sulit.com.ph, in an interview with InterAksyon. “This also means that payments and the exchange of products do not go through our system.”
It is in this viewpoint that David points out how the BIR might have missed a crucial factor in its efforts to go after online sellers: most of these traders are either one-time or small-time sellers that transact offline, which means they do not earn a recurring or significant profit from their transactions.
David said there should be clear-cut guidelines as to which kinds of sellers will be taxed, instead of just a “blanket” pronouncement coming from the BIR. “Juan does not need to register to BIR just to be able to sell his second hand phone,” he said. “Does Pedro, who has a sideline of selling t-shirts to his classmates to help pay for his college, need to pay tax?”
Scores of Internet users concurred with David’s point. In InterAksyon’s initial report on the matter, enraged commenters pointed out how the BIR seems to be going after the small-time players when big businesses are often overlooked.
“Small time entrepreneurs lang mga yan lalo na yung mga naghahanap buhay through the use of FB (Facebook),” said a commenter named “shady_jersey.” “Mag effort [kayo] sa mga malalaking companies na nalulusutan kayo (make an effort to run after the big companies that get away [from paying taxes]) ”
Another commenter, named Larry Collin, said online sellers like him use services such as Facebook and Sulit because they cannot afford to advertise in major media channels given their meager income from their small businesses.
Benjo Lopez, meanwhile, admitted that there are, indeed, big businesses operating online, but that their ventures also help the economy. “Nag-gegenerate sila ng mga trabaho (They genenerate jobs) (delivery, repair services). Dapat hindi mamatay ang mga yun dahil sa initiative na to (Their initiatives should not die). JOBS instead of TAX Please!” he stresssed.
Talk to e-Commerce industry first
Since the online commerce industry is a relatively young sector in the country, Sulit’s David emphasized the importance of carefully proceeding with this tax issue, lest it stunt the growth of e-Commerce in the Philippines altogether.
“We believe e-Commerce is a young industry locally and it has a very big potential to become a major contributor to our economy as what we are now seeing from other countries,” David said. “[But] there are a lot of questions needed to be answered before we can proceed with a proper implementation.”
The Sulit executive said the BIR must engage the e-Commerce industry in conversation on how best to proceed with the implementation of this initiative, since a lot of online sellers will be affected by the BIR’s recent move.
Additionally, avenues for easier processing of BIR requirements and remittance and payments should also be available — preferably online — considering the hassles entrepreneurs must endure just to ensure they pay their proper taxes.
“Since we are talking about the Internet space, these facilities also need to be online, [ones] that can be easily integrated with online transactions,” David said, adding that the government must also work on “improving online services” so that online traders can directly see the benefits of paying the proper taxes.
David also suggested that the BIR should consider lowering the initial amount that it will collect from online traders as well as the application fees so as to spur “mass adoption.” “Don’t make the cost a barrier,” he added.
This is a point Mariel readily agrees with: “I don’t mind registering as long as they make it realistic for hobbyists [and the like], ‘yung beneficial din naman sa sellers, (it should also be beneficial to the sellers)” she explained.
Online marketplaces such as Facebook, Multiply, and Sulit have made it easy for people like Mariel to set up their own small ventures, thanks in particular to the convenience they provide and the opportunity to closely connect with customers.
In a way, these platforms have contributed to the growth of the small and medium enterprise space in the Philippines, which today comprises about 98 percent of all business registrations, according to the Department of Trade and Industry.
These sites have become springboards for small-time entrepreneurs like Mariel to expand their business ideas and move into bigger opportunities. She said the hope is still there that one day, her small online venture would become a “real physical shop,” one that she would actually take pains to register with the government and religiously pay taxes for.