Sans income from cinemas, LGUs urged to tax streaming sites

With potential revenues from movies and concerts basically gone, local government units (LGUs) may want to look into taxing alternative sources, such as online streaming sites, according to the state-run National Tax Research Center (NTRC).

While the gradual easing of lockdowns has allowed some malls and movie theaters to restart operations in some parts of the country, LGUs would have to find ways to recover reliable income that could have otherwise come from amusement taxes, the think tank said in a report last week.

For instance, NTRC said “there are online streaming shows that can still be classified as sources of amusement.” LGUs “can tap these sites as sources of tax revenues as the country enters the chapter of the ‘new normal’,” it added.

The think tank, cited for example, Chicago’s ruling to collect local amusement taxes from video sites and subscription channels.

Aside from the national amusement tax prescribed by the Tax Code, a local levy is also imposed by provinces, cities and municipalities under the Local Government Code of 1991.

National amusement taxes cover the income of TV, radio and movie producers as well as cockpits, cabarets and clubs, jai alai, professional basketball and boxing games.

Review the law

Local governments, on the other hand, cover sales of cinemas and theaters, concert halls, circuses and boxing arenas, among other amusement places, according to the NTRC.

“Congress should consider reviewing the Local Government Code to align the limitations and taxing powers of LGUs to modern business models” in a bid to widen their tax base, the NTRC said.

Prepandemic, the national government collected amusement taxes averaging P134.5 million yearly from 2014 to 2018, while LGUs had a bigger combined annual average take of P887.72 million in the same period, the NTRC said.

Yearly collections from national and local amusement taxes also rose by an average of 10.71 percent and 7.76 percent, respectively, during the period.

But with various quarantine measures in place, such as the closure of movie houses, “LGUs in the greater Manila area were severely affected given that almost half of the amusement taxes contributors are located in this area,” NTRC said.

The NTRC noted at least six concerts of foreign artists scheduled at the height of the most stringent enhanced community quarantine (ECQ) from mid-March to May last year were canceled, resulting in an estimated foregone revenues of P9.81 million.

“In the case of amusement tax from movie theaters, the estimated foregone revenue is about P270,625 per screening or P1.08 million for four movie screenings per theater, per day” during the ECQ period, the NTRC said.

The cancellation of cockfighting or “sabong” events last year also resulted in “a significant loss of amusement tax collection for the national government as the ticket prices for [an international derby] ranged from P1,200 to P1,800,” the NTRC noted.

“Although local and national amusement taxes revenues are insignificant as percentage of total tax revenue of the local (less than 0.5 percent) and national government (less than 0.03 percent), 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 NTRC said. INQ