Collecting taxes from social media influencers “might take some time” as the Bureau of Internal Revenue (BIR) admitted that cashing in on the growing digital space remained a difficult task for the agency.
“We’re engaging the social media influencers and we’re trying to win their side,” BIR Assistant Commissioner Jethro Sabariaga told reporters on the sidelines of a tax symposium hosted by SGV & Co.
“Of course, in the engagement process, the more that you can ask them to do voluntary compliance, that’s the better process instead of being unfriendly to them. It might take some time but that is what we’re doing,” he noted.
Sabariaga did not provide data on how much revenues the BIR was expecting to generate from taxes on these influencers, especially those with legions of followers in a country that has been called the social media capital of the world.
Industry estimates showed that an influencer with a million followers could earn P100,000 to P150,000 for a single Instagram post.
Meanwhile, those who have less than a million followers get paid between P50,000 and P80,000, while content creators whose follower count falls below six digits commanded a rate between P25,000 and P40,000.
For Eleanor Roque, tax advisory head at accounting and auditing firm P&A Grant Thornton, the BIR could rely only on voluntary compliance for now as the income of social media influencers generally came from tech giants that are based abroad.
“So if the influencer does not voluntarily comply, the BIR needs to get information from foreign tax jurisdictions or foreign corporations to give them the needed information,” Roque said.
She added that the BIR could also send letters to social media personalities requiring them to register with the bureau and comply with tax rules.
The increase in internet penetration fueled the rapid growth of social media, which has now become a big influence on consumer spending.
Many social media users now use online platforms to research and eventually buy products and services.
This has, in turn, led more companies to shift from traditional advertising toward social media, relying on—and paying—influencers to promote their products and services.
Influencers thus become a vital component of marketing, in the process making social media influencers earn substantial amounts from regular posts on popular social media apps such as Facebook, Instagram, YouTube and TikTok.
When the BIR noticed that many of the local social media influencers were not registered or paying taxes, it issued in August 2021 Revenue Memorandum Circular (RMC) No. 97-2021 to remind these influencers of their obligations under existing tax laws and the possible sanctions for their failure to pay taxes.
It said these influencers must pay income and business taxes—which may either be percentage tax or value-added tax (VAT)—since they were considered as self-employed individuals.
The memorandum defines social media influencers as those who derive their income from sources such as the YouTube Partner Program, sponsored social and blog posts, display advertising, and becoming a brand representative or ambassador.
These influencers can also earn through affiliate marketing, cocreating product lines and promoting their own products; photo and video sales; digital courses, subscriptions and e-books, as well as podcasts and webinars.
The BIR said the taxable income of influencers would include payments received in consideration for services, irrespective of the manner or form of payment.
For instance, if an influencer receives free products in exchange for promotion, they must declare the fair value of such products as income.
The same is true for income treated as royalties originating from another country such as payments from YouTube and this must be included in the computation of the gross income.
However, the BIR immediately faced a hurdle after some big influencers deactivated their social media accounts for various reasons right after the issuance of RMC 97-2021.
The BIR said then that these influencers’ digital footprint might still be traced by the BIR’s information systems group.
The following month, the BIR said its crackdown on tax-delinquent influencers had started, targeting about 250 social media celebrities who were estimated to have earned millions of pesos and raked in freebies through their vlogs and social media posts.
The BIR said then that it had issued letters of authority (LOAs) to the unnamed influencers who, based on initial BIR investigation, belonged to the “top earners.”
LOAs are an official BIR document which empowers revenue officers to examine and scrutinize taxpayers’ books in order to determine their correct tax liabilities.