Tax on online streaming an option for LGUs


    The National Tax Research Center (NTRC) said online streaming shows can be considered for additional source of tax revenues by local government units (LGUs) amid the new normal, as collections of amusement taxes were adversely affected by the coronavirus disease 2019 (COVID-19) pandemic.

    The state-think tank’s study, Impact of COVID-19 pandemic on local amusement tax collection of LGUs in the Philippines, pointed out the COVID-19 pandemic-induced quarantine measures resulted in the cancellation of various entertainment events and activities, which could have been key sources of amusement taxes.

    Among the several cited examples, the NTRC report showed that estimated foregone revenue from six cancelled international concerts alone during the enhanced community quarantine (ECQ) period is about P9.81 million.

    Also, from March 17 to May 31, or during the ECQ, the report estimated the foregone revenue from local amusement tax from movie theaters at about P83.74 million, based on four screenings per day of 433 cinemas at 25 tickets sold per screening and P250 price per ticket.

    “Although local and national amusement taxes revenues are insignificant as percentage of total tax revenue of the local and national government, it is still a reliable revenue source because these contribute income that can be used to finance various social and economic programs of the government,” the report said.

    Data showed that for 2014 to 2018, total average collection from local amusement taxes were P887.72 million, while on a national level, P134.50 million. In terms of performance, the local and national amusement taxes revenue generally increased from 2014 to 2018 with an average growth of 7.76 percent and 10.71 percent, respectively.

    The NTRC report pointed out that section 140 of the Local Government Code (LGC) of 1991, as amended, is limited only to theaters, cinemas, concert halls, circuses and other places of amusement where one seeks admission to entertain oneself, by seeing or viewing the show or performance.

    “In this regard, the coverage of local amusement tax may be broadened to include places that may be considered as place of amusement. In addition, the phrase ‘places of amusement’ must be defined appropriately so as to include other establishments that may be considered as such,” the study said.

    While pandemic suspended or cancelled most, if not all, entertainment activities, the NTRC said there are online streaming shows that can still be classified as sources of amusement.

    “The LGUs can tap these sites as sources of tax revenues as the country enters the chapter of the new normal. People are advised to stay at home and limit leaving their residences and avoiding populated areas. Their constant seclusion encourages people to access video streaming sites as a form of entertainment,” the report said.

    “The case of Chicago may be taken into consideration in studying the feasibility of imposing local amusement tax on video sites and subscription channels,” it added, as the report mentioned that Chicago managed to tax video streaming services under its current amusement tax laws.

    “LGUs need a broader range of revenue tools. These should include revenue sources that automatically grow with the economy, and at present live streaming may be closely considered as an additional revenue source of LGUs,” the NTRC said.

    According to the state-think tank, Congress should also consider reviewing the LGC of 1991, as amended, to align the limitations and taxing powers of LGUs to modern business models.

    “For instance, expanding the coverage of local amusement tax may be explored by policymakers to provide additional revenue to LGUs,” the report said.

    “Expanding the local amusement tax coverage will give sufficient leeway for the local Sanggunian to explore other activities that may be covered by the local amusement tax,” it added. (A. Celis)