VAT 'not a new tax': Palace stands by Marcos' plan to tax digital transactions

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Metro Manila (CNN Philippines, July 27) — Malacañang on Wednesday defended President Ferdinand "Bongbong" Marcos Jr.'s proposal to impose value-added tax (VAT) on digital service providers, which he revealed during his inaugural State of the Nation Address (SONA).

"The VAT is not a new tax. We are just looking at the possibility that these industries have not been subjected to such a VAT before and that they should be," Press Secretary Trixie Cruz-Angeles told a palace briefing.

Marcos vowed an adjustment in the country's tax system during his address on Monday, citing the need to "catch up with the rapid developments of the digital economy.

This covered the collection of VAT on online transactions, which he said could earn the state about ₱11.7 billion next year alone. 

"It's like social media and so on must be subjected to income tax if there is income that is earned. The same goes for those that are subject to VAT," added Cruz-Angeles.

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Finance Secretary Benjamin Diokno earlier said taxing digital transactions is only fair, like how one pays taxes when purchasing an item from a physical store. 

The House of Representatives passed in September last year a bill imposing a 12% VAT on online transactions. However, it failed to hurdle the Senate during the 18th Congress.

The Marcos administration has been seeking more revenues amid the country's sky-high outstanding debt, which ballooned during the time of former President Rodrigo Duterte amid the COVID-19 health crisis.

The national government's borrowings are at ₱12.5 trillion as of end-May.