The Bureau of Internal Revenue has found another way to shore up its dismal collections—the social media influencers or those with large followings and thus derive incomes from sponsors in cash or kind, which the BIR said are taxable. At least 250 of the 1,000 top influencers of Twitter and other platforms will be the subject of BIR’s intense scrutiny.
SOCIAL media influencers and online sellers in the Philippines, who found instant fame and wealth reaching tens of millions by posting and uploading video materials in various platforms particularly YouTube, TikTok, Facebook and others are living the life, without paying a single centavo to the government despite their enormous earnings.
As a result, the Bureau of Internal Revenue is running after them to beef up its collections, which had waned with the economy during the pandemic.
The crackdown on tax-delinquent “influencers” has started, as the BIR initiated an investigation of 250 of such social media celebrities who may have earned millions of pesos and raked in freebies through their vlogs and social media posts.
LOAs issued
The BIR recently reported to Finance Secretary Carlos Dominguez III that it already issued letters of authority (LOAs) to the yet unnamed influencers who, based on initial BIR investigation, belonged to the “top earners,” the Department of Finance (DOF) said in a statement on Thursday (September 16).
LOAs are official BIR documents which empower revenue officers to examine and scrutinize the taxpayers’ books to determine their correct tax liabilities.
The BIR’s Revenue Memorandum Circular (RMC) No. 97-2021 issued in August reminded these influencers that taxes are due for every peso they earned.
In a text message on Thursday, Internal Revenue Deputy Commissioner Arnel Guballa declined to provide the names of the 250 social media personalities.
“We are collating their records,” Guballa said.
Register and settle
The DOF quoted Guballa as telling Dominguez that the BIR was still encouraging influencers to register as taxpayers and settle their dues.
On the 250 influencers currently being profiled by the BIR, Guballa said “we will do the investigation so that they would pay the necessary corresponding tax on their earnings.”
BIR’s dilemma
However, the BIR may face a hurdle in investigating some influencers who had already deactivated their social media accounts for various reasons right after the issuance of RMC 97-2021.
Guballa said these influencers’ digital footprint may still be traced by the BIR’s information systems group.
As more and more transactions take place in the digital space due to the “new normal” wrought by the prolonged COVID-19 pandemic, the government has turned its sights on uncaptured income tax sources generated through online channels.
In the case of influencers, the BIR said in RMC 97-2021 that it had received information that “certain social media influencers have not been paying their income taxes despite earning huge income from the different social media platforms.”
“There are also reports that they are not registered with the BIR or are registered under different tax types or lines of business but are also not declaring their earnings from social media platforms for tax purposes,” the country’s biggest tax-collection agency had said.
In the circular, the BIR had defined influencers as “all taxpayers, individuals or corporations, receiving income, in cash or in kind, from any social media sites and platforms (YouTube, Facebook, Instagram, Twitter, TikTok, Reddit, Snapchat, etc.) in exchange for services performed as bloggers, video bloggers or ‘vloggers’ or as an influencer, in general, and from any other activities performed on such social media sites and platforms.”
Business incomes
The BIR had explained that influencers’ earnings were being considered as business income of self-employed individuals or sole proprietors.
Being such, they must pay income tax, plus business taxes like percentage or the 12-percent value-added tax (VAT).
Even foreigners must pay taxes for their social media earnings here as the BIR had said influencers can qualify for deductions and protection against double taxation, as in the case of foreigners.
A group of social media influencers belonging to the group Creator and Influencer Council of the Philippines (CICP) already sought a dialogue with the BIR in August, while urging the agency to make it easier for them to settle their tax dues.
The BIR had warned of bigger fines and longer jail time awaiting those who profit from their vlogs and viral content on social media but do not pay taxes.
A circular issued last month clarified that influencers must pay income and value added tax from their earnings including from YouTube’s Partner Program, sponsored social posts, advertising and sales. Goods received in exchange for promotions must also be declared as income using the products’ fair market value, the finance department said.
The bureau said influencers who “willfully attempt to evade the payment of tax or willfully fail to make a tax return, to supply accurate and correct information or to pay tax” will be held criminally liable in addition to the payment of taxes and corresponding penalties.
“We encourage them to register, and then we have the profiling of over 250 personalities,” BIR Deputy Commissioner Arnel Guballa said.
Large following
Generally, influencers are people who have built a large following on social media and are earning money by creating content that they can monetize through advertisements and sponsored posts, among other ways.
Under a new circular issued last month, BIR reminded internet personalities to pay income tax and percentage tax or, if applicable, the value-added tax (VAT).
BIR raises 80 percent of tax revenues every year, so its weak collection performance due to a pandemic-induced economic slump has a devastating impact on state finances, particularly in funding costly coronavirus programs. The rest comes from collections of the Bureau of Customs and other regulatory agencies.
The BIR circular defined social media influencers as those who derive their income from sources such as the You Tube Partner Program; sponsored social and blog posts; display advertising; and becoming a brand representative or ambassador.
The circular added that these influencers may also generate income through affiliate marketing; co-creation of product lines; promotion of own products; photo and video sales; digital courses, subscriptions, e-books; and podcasts and webinars.
The bureau also explicitly stated that even influencers who receive free products in exchange for social media shout-outs and posts must declare as income the “fair market value” of the goods they got.
Meanwhile, income treated as royalties from another country, including payments under the YouTube Partner Program, is likewise included in the computation of the gross income of the influencer. BIR said it has the power to obtain information from tax authorities abroad through tax treaties it forged with other countries.
“The social media influencers are, therefore, advised to voluntary and truthfully declare their income and pay their corresponding taxes without waiting for a formal investigation to be conducted by the BIR to avoid being liable for tax evasion and for the civil penalty of fifty percent (50 percent) of the tax or of the deficiency tax,” the circular read in part.
Apart from social media influencers, BIR earlier reminded online sellers that they must pay sales and income taxes. Just recently, the bureau said it is studying how to collect taxes from cryptocurrency deals.
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