E-commerce barriers remain high

Trust in online shopping and digital payments in the Philippines is among the strongest in Southeast Asia, but logistics barriers and uneven regulatory enforcement are hampering the growth of small businesses, a regional study found.

A report by Singapore-based Blackbox Research said three in four Filipino e-commerce leaders view the country as ahead of its neighbors in digital payment maturity and consumer confidence.

However, they warned that inefficiencies in delivery, infrastructure and regulation are acting as a “hidden tax” on micro, small, and medium enterprises (MSMEs).

“Filipino consumers have shown remarkable trust in the digital economy, but the systems supporting that trust have yet to reach full maturity,” said David Black, founder and CEO of Blackbox Research.

“The opportunity now lies in closing those structural gaps so that MSMEs can scale alongside consumer demand,” he added.

Philippines Competitiveness Rating

Barriers

The study interviewed 46 e-commerce leaders and experts across Southeast Asia.

Regulatory inconsistencies were cited as a major barrier in e-commerce industries, with 87 percent of respondents saying uneven enforcement allows some cross-border sellers to evade taxes and product certification requirements.

In the Philippines, logistical gaps remain one of the biggest hurdles. The cost of shipping accounts for 20 percent to 30 percent of the order value, double that of those in mature markets.

The 7,641 islands in the archipelago further complicate shipping. Delivery timelines vary from 24 to 48 hours in Metro Manila to as long as seven to 14 days for remote provinces.

And while investment into e-commerce technologies is high, the report said this focused primarily on visibility and customer acquisition instead of reliability, returns processing and customer support.

Optimistic

Despite these challenges, the Philippines recorded an e-commerce optimism score of 7.93 out of 10 for the next three years, among the highest ratings in Southeast Asia.

“If logistics bottlenecks and compliance burdens can be tackled, the country is well placed to convert digital confidence into inclusive, nationwide growth,” the report said.

To maximize the country’s potential, the study called for greater public-private investment in MSMEs, expanded regional logistics hubs and simpler compliance processes.

“For the Philippines, the task is clear: strengthen the systems that sustain consumer confidence and ensure MSMEs are not just participants but beneficiaries of the region’s digital transformation,” the market research firm said.

“Without decisive collaboration on logistics, regulation and innovation, the very trust that fuels growth today could become its greatest constraint tomorrow,” it added.

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Source: Inquirer

PHL digital economy expected to sustain growth momentum

The Philippine digital economy is expected to maintain its growth trajectory, driven by e-commerce and the continued development of digital infrastructure.

The e-Conomy SEA report by Google, Temasek Holdings and Bain & Co. found that the Philippine digital economy is projected to grow 20% to $31 billion in terms of gross merchandise value (GMV), making it the fastest-growing digital economy in Southeast Asia.

The report also reiterated earlier market-size forecasts for the Philippines of $80 billion and $150 billion in GMV growth by 2030.

E-commerce will be the main driver for digital economy growth, with the segment projected to post $21 billion in GMV this year, up 23%.

Transport and food are expected to deliver $3 billion worth of GMV this year; while online media and online travel were valued at $4 billion and $3 billion, respectively.

“The increase in digital payment volumes is compelling service providers to maintain competitive fees while enhancing security and service reliability,” it said.

Digital payments are projected to post 22% growth in 2024 to $125 billion in gross transaction value (GTV). By 2030, digital payments are projected at between $200 billion and $300 billion in GTV.

GTV for digital payments includes the value of credit, debit, prepaid card, account-to-account, and e-wallet transactions, according to the report.

Google, the Singapore state investment company Temasek, and consulting firm Bain added that the surge in digital payments in the Philippines is keeping fees competitive while forcing providers to enhance security and service reliability.

“As the digital payments landscape matures and adoption becomes more widespread, e-wallet providers are increasing merchant discount rates,” according to the report.

The expansion of Philippine digital infrastructure is also expected to contribute to the overall digital economy’s growth, with broadband poised to connect even in remote areas.

Source: Business World

Imposition of 1% withholding tax on online sellers takes effect

The Bureau of Internal Revenue (BIR) has formally imposed the one percent withholding tax on online platform providers as the government moves to level the playing field among businesses.

In his latest revenue memorandum circular, BIR Commissioner Romeo Lumagui Jr. said all electronic marketplace operators were ordered to impose the withholding tax to sellers and merchants last July 15.

The imposition of withholding tax was supposed to begin in mid-April, but the BIR extended the transitory period for 90 days to give online merchants time to comply with the other related policies or requirements of other government agencies.

“We have already extended this by 90 days. No further extensions will be given,” Lumagui said.

A withholding tax is a kind of tax on the salary earned by a certain employee. Based on the current framework, employers are required to deduct a certain percentage of their employee’s salary, which in turn will be remitted to the BIR.

“This is not a new tax, it is merely a system of taxation where taxes are collected at source, which will be credited against the total income tax liability of the sellers and merchants,” Lumagui said.

“We aim to level the playing field between brick-and-mortar stores, which are regularly complying with their tax obligations, and online marketplaces. Whether their business is operated online or through physical stores, sellers and merchants have to pay their taxes,” he said.

Further, the circular only extended the transitory period for digital financial services providers.

The BIR will impose a withholding tax of one percent on one-half of the gross remittances of the online platform providers to the sellers of the goods and services.

The withholding tax imposed, however, will not apply if the annual total gross remittances to an online merchant for the past taxable year has not exceeded P500,000.

Also excluded are online sellers with cumulative gross remittances to an online merchant in a taxable year that have not yet exceeded P500,000, as well as those cooperatives duly registered with the BIR with a valid certificate of tax exemption.

Gross remittance is the total amount received by an e-marketplace operator or digital financial services provider from a buyer.

According to the BIR, e-marketplace refers to a digital platform whose business is to connect online consumers with online merchants, facilitate and conclude the sales, process the payment of the products, goods or services through the platform.

It also facilitates the shipment of goods or provides logistics services and post-purchase support within such platforms and otherwise retains oversight over the consummation of the transaction.

This includes the marketplace for online shopping, food delivery platforms, platforms for booking of resort, hotel, motel, inn, house, condominium unit, bed space, room for rent and other similar lodging accommodations and other service or product marketplaces.

Data showed that there are roughly two million entities involved in online selling as of last year.

Source: Philstar