House body OKs bill slapping VAT on digital services

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The House committee on ways and means chaired by Albay Rep. Joey Salceda yesterday approved a measure imposing value-added tax (VAT) on all digital services to help raise revenues and fund the government’s fiscal programs.

Salceda, principal author of House Bill No. 372 or the proposed digital economy VAT, said the measure seeks to level the playing field since local digital service providers (DSPs) are paying VAT unlike non-resident ones.

“These companies earn income here and are paying taxes in their home countries,” he said, noting that the measure is expected to initially raise P9 billion in revenues.

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The bill aims “to close ambiguities in the VAT system that have allowed some digital services and goods sold over the digital space to remain outside the coverage of VAT.”

Salceda said the House is not imposing a new tax, noting that while the digital economy should be subject to VAT, the government “is unable to capture these revenues because of ambiguities in tax laws.”

The measure, which covers DSPs involved in local and cross-border transactions of digital services in the Philippines, requires nonresident DSPs to collect and remit the VAT on the transactions that pass through its platform.

It also seeks to simplify invoicing and registration requirements for VAT-registered nonresident DSPs and requires the registration of DSPs with gross sales/receipts exceeding P3 million for past 12 months before the date of filing of VAT return or those expecting that their gross sales or receipts will exceed P3 million.

Militant lawmakers have opposed the measure as tthe additional tax would be passed on to consumers, leading to more expensive subscriptions to digital providers like Netflix, Spotify and other online platforms.

Rep. Arlene Brosas (PL, Gabriela), a member of the three-man Makabayan bloc, said corporations should be taxed more instead of consumption-based services which will affect the masses but Salceda said service providers are already passing it on to consumers the VAT they pay in other countries.

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