Philippine Revenue Agency Studies E-Commerce Taxation

Daily Herald (Arlington Heights, IL), January 12, 2001 | Go to article overview

Philippine Revenue Agency Studies E-Commerce Taxation


MANILA, PHILIPPINES, 2001 JAN 11 (NB) -- By Melvin G Calimag, Metropolitan Computer Times. How do you levy a tax on a business deal if the two contracting parties claim they are in cyberspace although physically present inside a country?

With the Internet increasingly being recognized as a virtual meeting place, the problem of entities possibly evading tax obligations becomes a primary concern to some governments.

This potentially explosive issue, known in legal circles as situs of transaction or the "physical presence" rule, is throwing the Bureau of Internal Revenue off its feet after noting that the Philippines' e-commerce law does not have an explicit provision on the subject.

The cyberlaw was hastily enacted on June 4, 2000 after the country was heavily criticized in the aftermath of the worldwide destruction brought by the ILOVEYOU virus.

Section 23 of the said law considers the business addresses of two parties as the origin of the electronic data message. It does not say anything though, about what happens if the parties involved mutually deny they entered into a transaction inside the country.

Rules under existing statutes stipulate that tax can only be imposed if the transaction was consummated within Philippine soil. argue that it purchased a product through a Web site that is based overseas even it were physically located in the Philippines.

"We simply cannot allow this to happen. The government will be deprived of the income it would earn from these transactions," said Regional Director Antonio Ortega.

The BIR is hoping that an amendment to the controversial item will be passed as soon as Congress convenes for a special session. …

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