Lawmakers want additional tax on video streaming, online shopping

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Metro Manila (CNN Philippines, May 19) — Subscribing to Netflix to watch your favorite show or shopping at Lazada may cost you more soon as two lawmakers propose additional tax on digital services.

House Ways and Means Committee Chairman Joey Salceda last Monday filed House Bill 6765 or the “Digital Economy Taxation Act of 2020" to raise more revenues to fund the government’s efforts to recover from the impact of the COVID-19 pandemic.

If passed into law, the measure would yield about P29.1 billion annually in incremental revenues for the government.

“The digital economy is becoming a rising component of overall commerce. While it has brought convenience and efficient in many sectors where it is now becoming a competitor, if not the norm, it is also a largely untaxed segment of the economy,” according to the bill.

Under the measure, digital advertising by Google and social media giant Facebook, as well as subscription-based services like Netflix and Spotify will be subject to value added tax.

Salceda noted that companies which offer streaming services do not pay taxes, while Google and Facebook are not subject to any VAT for advertising.

“No new taxes here, we just want them to pay their fair share,” he said in a statement.

The lawmaker pointed out that social media platforms will remain free and only those who advertise using these sites will be affected by the bill.

The bill also proposes that “network orchestrators” like Grab, Angkas and other similar services which link customers and providers be made withholding agents for income taxes.

On the other hand, network orchestrators for lease services like AirBnB and online shopping platforms like Lazada and Shoppee, will be withholding agents for VAT.

Also under the measure, digital service companies are required to do have a resident agent or representative office in the country. Salceda said that this is for consumer protection as some businesses do not have a physical office in the country.

A day after Salceda filed the bill, Senator Ramon "Bong" Revilla Jr. filed a resolution urging the upper chamber to look into the possibility of collecting taxes from multinational online streaming services.

Revilla filed on Tuesday Senate Resolution 410 urging the Senate Committee on Ways and Means and other appropriate Senate panels to consider the proposal in aid of crafting legislation on a digital taxation framework.

"We need to embrace the digital revolution of our time, and to comprehensively review and update our existing tax laws regarding digital economy," he said in a statement.

Before the COVID-19 pandemic, the Philippine digital economy was expected to grow by more than 250%, from $7 billion to $25 billion by 2025. Revilla said that these figures are equivalent to 5.3 percent of the country's gross domestic product.

In 2013, the Bureau of Internal Revenue issued Memorandum Circular No. 55-2013 reminding obligations of taxpayers related to online business transactions, including online shopping or online retailing, online intermediary service, online advertisement/classified ads, and online auction.