MANILA, Philippines – Expect the prices of your video or audio streaming services to go up next year with the newly passed law on value-added taxes (VAT) for foreign digital services.
On Wednesday, October 2, President Ferdinand Marcos Jr. signed into law a measure imposing the value-added tax (VAT) on nonresident digital service providers. Although this won’t take effect until at least four months from now, the government is already trying to ease fears that it will drive up the cost of digital goods and services, like Netflix and HBO.
“Whether magkakaroon ng price increase, it doesn’t necessarily follow. It’s a business decision by the service providers. But then nagbabayad na naman dapat sila from the very beginning, so they should have incorporated ‘yung concept ng VAT na ‘yan sa simula pa lang during their pricing,” Bureau of Internal Revenue (BIR) Commissioner Romeo Lumagui Jr. said in a press briefing on Wednesday, October 2.
(Whether there will be a price increase or not, it doesn’t necessarily follow. It’s a business decision by the service providers. But they should have already incorporated VAT from the beginning, as they were supposed to be paying it all along.)
However, a tax expert warns that, despite the government’s “sugarcoating,” it is Filipino consumers who will ultimately shoulder the burden, as companies are likely to pass the tax on to users in the form of higher prices.
“Ibig sabihin, kung naniningil ng P500 monthly si Netflix, magdadagdag sila ngayon ng 12% VAT, at ‘yung dinagdag nila, i-reremit nila sa Philippine government,” Mon Abrera, founding chairman and chief executive officer of the Asian Consulting Group, said. “So, in short, hindi pa rin sila nagbayad. Tayo pa rin ang sumalo ‘nun.”
(If Netflix is currently charging P500 per month, they will likely add the 12% VAT, and that increase will be remitted to the government. So, in short, the companies still aren’t paying the tax. It’s us consumers bearing the cost.)
Abrea said that while it’s good that government wants to level the playing field for online and brick-and-mortar marketplaces that now both have to include VAT on their products, he lamented that this new law hurts Filipino consumers’ entertainment preferences.
“Kung online selling lang, patas, ‘di ba? Oo nga naman, kung bumili ka sa mall, sa sari-sari store na maliit, or online, dapat pareparehas may tax. Agree ako doon,” he said. “Pero ngayon, pati ‘yung libangan natin na mga Netflix, Prime Video, HBO, lahat ‘yan ngayon [may VAT].”
(If it’s just online selling, it’s fair, right? Whether you’re buying in a mall, at a small sari-sari store, or online, they should all have tax. I agree with that. But now, even our entertainment — like Netflix, Prime Video, and HBO — will have VAT as well.)
The VAT imposed by the new law will be equal to 12% of gross receipts derived from the sale or exchange of services, including digital services, and the use or lease of properties.
According to President Marcos, this will generate P105 billion in government revenue over the next five years.
However, Abrea argued that there is a better strategy. Instead of imposing a VAT on digital services, the government should have focused on implementing an income tax on the profits of these foreign digital service providers. That way, it would be the companies themselves carrying the tax burden, and not a burgeoning Filipino middle class that may now have to pay more for Netflix.
Power to block
Lumagui also said on Wednesday that the new law gives the government the power to block the website or platform that refuses to comply. He said these foreign digital services will then lose the revenues earned in the Philippines.
Abrea said this means the real loser in the end is the consumer.
“Sino magdudusa kung iblock nila yung Netflix, tayo rin. Wala na tayong Netflix access. Yun ang ultimate na pwede nilang gawin. Parang yung China, binablock nila yung mga software na ayaw nila,” he said in the same interview.
(Who will suffer if they block Netflix? Us. We won’t have access to Netflix. That’s the ultimate thing they can do. Like how it’s being done in China, blocking the software they don’t like.)
The implementing rules and regulations (IRR) for Republic Act 12013 will be promulgated 90 days or 3 months from the effectivity of the act. Once the IRR becomes effective, there will be another transition period of 120 days or 4 months to allow the BIR to establish implementation systems. – Rappler.com
