Albay Rep. Joey Salceda, chair of the House ways and means committee, is pushing the imposition of a tax on digital services—specifically, subscriptions to video and music streaming apps, ads on social media sites and making online sales platforms as withholding tax agents—to offset an estimated P120 billion in forgone revenues once the government cuts corporate income taxes to 25 percent to soothe the pain inflicted by COVID-19 on businesses.
Salceda told the Inquirer on Monday that he intended to call these new tax measures as “Netflix tax,” “Facebook ads tax” and “Lazada tax,” respectively.In the case of Netflix tax, Salceda said the current standard digital services tax slapped on subscriptions worldwide was 5 percent, although he noted that Chile imposes a higher 19 percent.
Salceda said the Philippines might as well slap a new 12-percent tax on subscriptions to video and music streaming sites, a market currently worth about P5 billion.
At present, whatever subscription fees were being collected by apps like Netflix or Spotify weren’t levied any tax by the Philippine government, Salceda noted.
For Facebook ads tax, Salceda said the idea was to require that digital advertisements be made through a country representative of Facebook and Google so it becomes least problematic.
As such, collection of 12-percent value-added tax (VAT) and corporate income tax among digital advertisers will augment the current revenue base, he explained.
“The big money is in finding a way to tax the advertising on Facebook and Google,” Salceda said, adding that these two tech giants operate like a duopoly in the country as they dominate the online space here.
Citing a model proposed by 2018 Nobel Prize in Economics winner Paul Romer, Salceda said tax on digital advertising woud be “based on how much companies earn from displaying the ads in the tax jurisdiction, because that’s where value is created.”
As for the proposed Lazada tax, Salceda noted that only 50 percent of vendors who sell their goods and services via online marketplaces like the Alibaba Group’s Lazada, Amazon and Shopee, among others, pay VAT.
Among online sellers, “around half are fully compliant [with VAT payments] since they are large taxpayers and accredited shops,” he said.
To capture the unpaid VAT, Salceda said these online platforms would be tapped to also serve as withholding tax agents of their suppliers.
With sales of the Philippines’ e-commerce sector estimated to reach about P260 billion this year, VAT collections should reach around P30 billion, Salceda said. INQ