The innovation brought about by the advancement of technology have

drastically affect how people behave and go about their daily tasks. As how the
number of computer literate arises, digital individual also increases and the easier it
becomes to exchange information and facilitate remote transactions. As such,
conducting business has also become more convenient. Responding to clients’
inquiries and delivering goods and services are now more efficient for both buyers
and sellers (Consigo, 2018). Hence, the internet has transformed into an infinite
market place where everything and anything can be bought and sold.

These technological advances may put particular pressure on the principles

governing the taxation of transnational transactions. It is very nature of these
developments that they tend to blur national borders and the source and character of
income. Consequently, significant issues often arise regarding how the income
arising from transnational transactions utilizing these technologies should be treated
under current rules. As a result, it is possible that counties will claim inconsistent
taxing jurisdiction, with the attendant possibility that taxpayers will be subjected to
international double taxation (Guttentag, 2010).

The e-commerce is itself big business and that potential tax revenues are likely
to be substantial. In the United States, the growth of e-commerce has had a positive
effect on state and local government revenues, yet the potential impact of e-
commerce on future sales tax revenues is uncertain at this time. A recent study
estimates that, in 2002, state and local governments collected $140 million in sales
and use taxes from business-to-consumer purchases over the internet, but were
unable to collect an additional $525 million in sales and use taxes from internet retail
purchases (Forrester Research, Inc., 2005). Future revenue losses for 2003 resulting
from business-to-consumer sales are projected to be $3.5 billion-less than 2% of all
revenue from sales and use tax collection estimated for 2003 but is still significant
amount of money (Goolsbee, 2005).

In the Philippines, a joint report by Globe Telecom and online news portal
Rappler revealed that the penetration rate of mobile internet is growing at 150%
every year, with average users spending 3.2 hours on mobile internet, and 5.2 hours
on desktops and tablets. The same report noted that five out of 10 Filipinos recently
bought something from the internet, including games, music, apps, services and
physical goods. Like minded entrepreneurs have welcomed this digital phenomenon
with open arms, judging from the popularity of e-commerce websites such as
Lazada, Zalora, and Shoppee, which millions of pesos in sales.

Since these are new business platforms that were not even present a few
decades ago, the Bureau of Internal Revenue (BIR) has seen fit to remind the
transacting parties of their tax obligations while keeping in mind the shared interests
of the government, that is, to ensure the proper collection of taxes from the profits
gained in the conduct of online business transactions. These policies are intended to
complement the electronic commerce act of 2000, otherwise known as republic act
8792. Currently, BIR issued Revenue Memorandum Circular No. 055-13, which
further reiterated the taxpayers’ obligations in relation to online business
transactions. The regulations enumerated the responsibilities of online merchant and
online intermediaries on tax compliance, to ensure that proper taxes are remitted to
the government and all the transactions using the internet are properly receipted.

In local setting, bir is not only to go after online entrepreneurs who fail to pay
taxes and issue receipts, but also operators of “buy and sell” web sites, which allow
tier members to conduct business online without verifying if they are registered with
the bir and the Department of Trade and Industry (DTI). In e-commerce transaction,
the problem arises in the determination of the source of the income because of the
source of the income because the line between the principle of e-commerce
transactions and the traditional physical-business concept, which involve assets,
personnel, or both, becomes vague. Foreign businesses, or even individuals, can tap
the domestic market without having to go through the burdensome ins and outs of
establishing physical presence within the domestic market (Kapunan, 2015).

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