Signing Off from Taxes: Will deleting your social media account delete your tax liabilities?
YouTube, Facebook Live, Twitch, TikTok, and Instagram, game changers as to how people consume information and entertainment have caused a ripple effect in related industries such as marketing and advertising. Enterprising individuals, popularly known these days as social media influencers, have since caught on to this zeitgeist and have embraced their creative personalities in order to try and cash in on the action.
Meanwhile, with the rising costs of implementing and sustaining COVID-19 policies and programs, the government, through the Bureau of Internal Revenue (BIR), is resorting to innovative ways to generate income. During the early months of the pandemic, news came out that the BIR will be going after internet-based entrepreneurs. This time, the BIR is pursuing social media influencers and personalities. As part of their initiatives to tax internet-sourced income, the BIR published Revenue Memorandum Circular (RMC) No. 97-2021, dated 16 August 2021, which clarifies that social media influencers, not categorized as corporations and partnerships, are classified as self-employed individuals or persons engaged in trade or business.
Under RMC 97-2021, the term social media influencer refers to all taxpayers, individuals or corporations, receiving income, in cash or in kind, from any social media site or platform, in exchange for services performed as bloggers, video bloggers or vloggers or as an influencer, in general, and from any other activities performed on social media sites and platforms.
The taxation of social media influencers has been a hot-topic on the internet for weeks since news came out that a popular video blogger couple deleted their YouTube account with around one million subscribers in order to avoid payment of taxes.
People have since aired their opinions regarding the BIR’s move. One argument in support of social media influencers is that they are not liable for any tax since no law specifically mentions influencers as liable for income tax, Value-added Tax (“VAT”), and/or percentage tax prior to RMC 97-2021. In other words, RMC 97-2021 cannot be applied retroactively because doing so would be a violation of the constitutional proscription against ex post facto laws.
Here are some of the points to consider.
One, RMC No. 97-2021 implements an existing law. Section 23 of the National Internal Revenue Code of the Philippines (NIRC) states that a resident citizen of the Philippines shall be taxable on all income derived from sources within and outside the Philippines. It does not matter if the law did not include the influencers before the issuance of RMC 97-2021 since the law that dictates the tax liability of resident Filipinos encompasses all citizens of the Philippines.
Two, RMC 97-2021 was issued to revenue officers to conduct a full-blown tax investigation against the influencers residing and/or registered within their respective jurisdictions. It must be noted that income tax laws, VAT laws, and percentage tax laws existed even before the advent of social media and the existence of these so-called influencers. It would also be a mistake to argue that the circular is an ex post facto law because there is actually no revenue statute being implemented retroactively. Those who read the circular for themselves would have noticed that the circular is not meant to retroactively implement a law -- it was issued to clarify the tax obligations of all social media influencers, individual or corporation, with the end goal of raising revenues from their undeclared income and at the same time, reminding them of their obligations under the law and of the possible consequences of their failure to pay taxes.
In sum, the incomes derived by social media influencers from different social media platforms for services rendered or to be rendered are subject to income tax, VAT, or percentage tax. They are also required to register, file, and update tax returns. Compliance with tax obligations depend upon the influencer’s citizenship, residency, and registration as a taxpayer, and subject to other allowable deductions.
With that said, a willful attempt to evade or defeat the imposition of taxes, such as the deletion of social media accounts, and failure to file returns, supply correct information, remit and refund withheld and pay taxes, may result in fines, penalties, and imprisonment.
