As e-commerce continues to flourish in the Philippines, the Department of Finance (DOF) has issued a warning about potential revenue losses due to the government’s slow digitalization efforts. Finance Secretary Ralph G. Recto is now seeking additional funding from the Asian Development Bank (ADB) to accelerate the country’s digital transformation.

With many Filipino consumers shifting to online shopping, the DOF emphasizes the critical need for digitalization. Recto highlights that the government’s digitalization program is essential to adapt to the changing landscape of commerce.

The Bureau of Internal Revenue (BIR) has been focusing on improving tax collection from online sellers and new platforms. The pandemic has accelerated the shift to online selling, with an estimated two million entities now operating online in the country.

In 2022, the Philippines’ digital economy reached P2.08 trillion, contributing significantly to the GDP. The ADB has pledged to collaborate closely with the government on the proposed Digital Transformation Project for the BIR to support tax reform initiatives and domestic resource mobilization efforts.

Since January, the BIR has implemented a one percent withholding tax on online merchants benefiting from the e-commerce industry’s growth. However, small-scale online sellers with yearly gross remittances under P500,000 or cumulative gross remittances below this limit are exempted from this tax.

The urgency to boost digitalization underscores the government’s commitment to harnessing technology for revenue generation and economic development amidst the evolving landscape of commerce in the Philippines.