The Emerging Philippine Online Economy

If the government wishes to encourage online sellers to register and pay taxes, it must crack the whip on tax delinquents such as POGOs. It must demonstrate to the entire online economic community its fairness in the collection and administration of taxes.

The Philippine Online Economy may be the country’s saving grace as it faces the possibility of a major economic recession for year 2020. The shift to a digital strategy for businesses has become a critical need than an option due to the extensive lockdowns implemented, physical distancing restrictions even with the relaxation of community quarantine policies, and the aversion of people for face-to-face transactions due to fear of catching the COVID19 virus.

Given the uncertainty on the availability of a vaccine by end 2020 or early 2021, it is possible that e-commerce activities may account for half of the country’s economy by early 2021 as against previous forecasts that it would do so by 2022.

Even prior to the “COVID times”, e-commerce activities in the Philippines have been on a constant upswing. Based on a survey conducted by Global Web Index in 2019 among internet users, it was found that:

  • 91% searched online for a product or service to buy

  • 92% visited an online retail store or site

  • 75% purchased a product or service online

  • 39% made an online purchase via a laptop or desktop computer

  • 62% made an online purchase via a mobile phone

A dramatic increase in these numbers is expected for this year as a result of reduced physical mobility based on Google’s COVID-19 community mobility reports from 29 February to 11 April 2020 where:

  • Patronage of recreation facilities such as restaurants, shopping malls and cinemas plunged by 82% compared to the baseline period covering 3 January to 6 February 2020

  • Patronage of groceries and pharmacies dropped to 60% during the same period

Due to the noticeable increase of online business transactions in the past few months, the BIR stringently reminded online sellers to register their businesses and pay the appropriate taxes in a bid to raise revenues to fund current and future government efforts against COVID-19. However, it seems that the position does not coincide with the existing operational capabilities of permitting and licensing agencies as most of them such as DTI, BIR, and SEC are operating on a skeletal workforce.

While it is important for all businesses to be legally compliant for a level playing field, government should provide humanitarian considerations by extending deadlines for registration and temporary tax relief to online sellers especially for startups who are barely earning and using the little for their families’ survival.

In the long run, it is important for government to ease the regulatory and bureaucratic burden to encourage online businesses to register and pay the right taxes. This includes improving the existing electronic processing system for taxes, online registration of businesses and providing incentives on top what is being provided by existing MSME laws.

If the government wishes to encourage online sellers to register and pay taxes, it must crack the whip on tax delinquents such as POGOs. It must demonstrate to the entire online economic community its fairness in the collection and administration of taxes. 

Otherwise, it appears that the government is only milking the hard-earned money of online sellers to cover up for its failures to collect taxes and curb corruption.

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About the Author
Mr. Aaron Benedict De Leon is currently a Business Development Practitioner in a private consulting firm. He has more than six years of professional experience in leading and managing political and non-government organizations, specializing in organizational management, policy development and program management. He has had stints with notable political/socio-civic organizations, serving in various capacities as: Secretary-General of the Centrist Democratic Party of the Philippines (CDP) [2013-2015], Founding Chairperson of the Centrist Democratic Youth Association of the Philippines (CDYAP) [2012-2014], Philippine Representative to the International Young Democrat Union (IYDU) [2011-2012], Chairperson of the Christian Democratic Youth [2011-2012], Secretary-General of YOUTH Philippines [2010-2011], and Spokesperson/Communications Director of the GT2010 Gilbert Teodoro Presidential Campaign [2009-2010].
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