MANILA, Philippines — After the President signed a law imposing a 12 percent value-added tax (VAT) on foreign digital services providers (DSPs) such as Netflix, Spotify, and Google, among others, it is now up to these companies to decide whether to raise their product prices or not, according to an official from the Bureau of Internal Revenue (BIR).
On Wednesday, President Ferdinand Marcos Jr. signed Republic Act No. 12023, also known as the VAT on Digital Services law.
This law mandates a quarterly tax on foreign DSPs such as video streaming platforms, mobile applications, online advertising spaces, search engine services, and social networks, among others.
READ: Marcos signs law imposing 12% VAT on digital services from offshore firms
In a press briefing after the signing ceremony, BIR Commissioner Romeo Lumagui Jr. said that it would be the company’s decision whether they would impose a price increase for their customers or not.
“As to whether magkakaroon ng (there would be) price increases, it doesn’t necessarily follow. It’s a business decision by the providers,” he said when asked if the public may expect a surge in the monthly subscription fee to these online services.
“Pwedeng magkaroon ng price increase, but again, I think it would be minimal; hindi naman ‘yan 12 percent automatically,” Lumagui added.
(There could be a price increase, but it would be minimal; it won’t automatically be 12 percent.)
The commissioner further stressed that the DSPs can increase their pricing at their discretion.
Moreover, Lumagui said that the law is not seen to discourage DSPs from doing business in the country.
“We are confident that this will not discourage them from coming here in the Philippines,” he said.
Companies that would not comply with the VAT imposition may face penalties and be blocked from providing their services in the Philippines.
READ: How to save money on streaming services
Lumagui said that the government is expected to generate P105 billion in the next five years from the law.
Five percent of the revenues generated by this law will be allocated to local creative industries, while the rest will be dispersed to various sectors, he added.