Background of the Study

The Bureau of Internal Revenue or simply BIR is an attached agency of the Department of
Finance. Under this agency, this is tasked to assess and collect all national internal revenue taxes,
fees, charges, and to enforce all forfeitures, penalties, and fines connected therewith. The BIR also
issues Revenue Issuances, under this issuance there are Revenue Regulations, Revenue
Memorandum Orders (RMO), Revenue Memorandum Circulars (RMC), Revenue Delegation Authority
Orders (RDAO), and Revenue Administrative Orders (RAO). The roles of these issuances are to serve
as a notice, for example, Revenue Regulations are issued for the effective enforcement of the
provisions of the National Internal Revenue Code, wherein RMO’s are issuances that provide directives
or instructions, and RMCs are issuances that publish pertinent and applicable portions, as well as
amplifications, of laws, rules, regulations and precedents issued by the BIR and other agencies/offices,
all according to the BIR. The study only focuses around the Revenue Memorandum Circular issued by
the BIR, specifically, RMC 60-2020. The RMC aims to cover online sellers/merchants and other
stakeholders in the Philippines involved in digital transactions such as payment gateways, delivery
channels, internet service providers and other facilitators. Below are the types of Businesses that is
being regulated by the BIR under RMC 60-2020:
 E-commerce platform providers
 Internet retailers of consumer goods
 Digital service, membership, and subscription
 Digital transaction through the use of electronic platforms and media
 Online blogging, film makers, earning from advertising gained from their online
channels
 Ride-hailing services for food, transportation, delivery, or merchandise

The goal of RMC 60-2020 is to encourage those who are engaged in online selling to register
under BIR, according to DOF Revenue Operations Group Undersecretary Antonette Tionko. During
2020, online businesses have increased due to the community quarantine implemented by the
Government, because online selling does not promote any physical contacts when ordering or buying a
product, thus it is in compliance with the quarantine protocols. However, BIR does now require these
digital businesses to register, meaning that, they are now expected to pay taxes if their income or
earning is above PHP250,000 a year, however if not, they are not liable to pay any taxes but they are
still required to file their annual Income Tax returns. The Filipinos are known to rely on digital b
There are three ways that a business can accumulate or pay taxes, first is using the Other
Percentage Tax (OPT), the Value-Added Tax (VAT), and payment of tax based on graduated income
tax. Businesses that are required to file OPT (or specifically 3% tax) are the businesses whose annual
sales and/or gross receipts exceed PHP250,000 but not the VAT-threshold of Php3,000,000 and is
VAT Exempt, and for the latter, businesses that are required to file for VAT are those businesses
whose annual sales and/or gross receipts exceed Php3,000,000, VAT registered businesses are whose
gross sales are subject to 12% sales tax. Under OPT it is usually the seller or the business who
shoulders the tax, on the other hand, VAT-registered businesses does not shoulder the VAT payment,
the consumer is the one who shoulders the tax, this is called an indirect tax, and is seen at the receipt
after buying the product and VAT causes the businesses to heighten the prices of their products. For
graduated income tax, the rate of the tax to be paid by the tax payer depends on how much the
business earns per year, below is the tax table used as a basis for graduated income tax:
 Amount of Taxable Income
Rate
Over But Not Over
0 250,000 0%
250,000 400,000 20% of the excess over P250,000
400,000 800,000 P30,000 + 25% of the excess over P400,000
800,000 2,000,000 P130,000 + 30% of the excess over P800,000
2,000,000 8,000,000 P490,000 + 32% of the excess over P2 Million
8,000,000 P2,410,000 + 35% of the excess over P8 Million
Figure 1: Revised Witholding Tax Table under Tax Reform for Acceleration and Inclusion
(TRAIN)
All of these taxes are one of the factors on how individuals change the model of their
businesses, especially those businesses who incur PHP250,000 above earning per year. One of the
most immediate and clear effects is that, these taxes cause a direct effect on the price of goods, this
happens because businesses incur higher costs than before, and the higher the cost being incurred by
the business, the higher the prices for the products being sold by these businesses. It also has a
probable or indirect effect on the demand for the products being sold by the business, let us say for
example, the business is VAT-registered, thus is required to pay VAT on every transaction it incurs, the
consumer ends up spending more money on taxes and less on the goods, if the goods are cheaper
than the tax. This ends up driving the demands down, or it forces the businesses to reduce its prices in
order to maintain its demand, both of these consequences would lead to businesses having their
income lowered as these effects occur.