September 15, 2021 | 00h00
To boost revenue collection
MANILA, Philippines – Expanding value added tax (VAT) regimes to include imported digital services in digital transactions could help boost the Philippines’ revenue, according to the International Monetary Fund (IMF).
In a report titled “Digitization and Taxation in Asia,” the IMF said that imposing VAT on remote digital services and certain goods to customers could directly increase the total VAT revenues of the Philippines, Bangladesh, India, Indonesia and Vietnam up to 0.11% of gross domestic product (GDP).
The IMF’s Asia-Pacific and Fiscal Affairs departments said in the 74-page report that the projection was based on 100% of digital media transactions, 10% of all e-commerce transactions, 5% of digital advertising. and 15% of electronic transactions. services, mobility and travel.
“This initial income gain may become larger through indirect effects,” he said.
The IMF said governments could realize potential additional benefits by including digital services and e-commerce in the VAT network by using the large amount of information held by digital platforms to improve VAT compliance, d ‘other taxes and other taxpayers using the platforms as tax collectors.
“The options for this include the demand for information collected by digital markets on the revenues of suppliers operating through their platforms. This information can then inform compliance management, for example, in the tourism and mobility services industry. It can contribute significantly to income, ”the IMF said.
According to the multilateral lender, the introduction of reporting obligations to obtain information on consumption and income generated through digital platforms could produce important additional benefits for governments.
The IMF has said that digitization in Asia is pervasive, unique and growing. Growth, the IMF said, is being accelerated by the pandemic as internet users in Asia far outpace numbers in other parts of the world.
He said extending VAT to more effectively capture e-commerce and digital services could generate significant short-term revenue and other efficiency gains than imposing the Digital Services Tax (DST ) or the comprehensive reform proposal under consideration by the Organization for Economic Co-operation and Development (OECD).
“The global tax reform proposals will create winners and losers in the region, although the overall impact on revenue is likely to be modest. Investment centers and low tax jurisdictions are likely to lose income as less profit will be transferred to them. Countries that do not host the headquarters of large multinational companies, but have a large user base of their clients, are likely to derive income from the reallocation, ”the IMF said.
The IMF said the Philippines, Bangladesh, Thailand and Vietnam each have 50-100 million mobile connections compared to 200 million in Japan, creating huge potential for growth due to the digitalization of economies.
However, the IMF has said that the application of the DST is expected to generate relatively low incomes of around 0.02% of GDP if the Philippines, Bangladesh, India, Indonesia and Vietnam follow the application of the DST. the new tax.
Additionally, the IMF has warned that DST taxpayers who are predominantly U.S. companies could exacerbate the potential for retaliatory trade action, as 25% of total profits earned by multinational corporations are U.S. companies.