28-6-2024 (MANILA) In a significant move towards bolstering state coffers, Philippine lawmakers have given their assent to a joint bill that aims to impose a tax on foreign digital services, including popular streaming platforms such as Netflix, HBO, and Disney+. This legislative step is designed to create a fresh revenue stream for the government, potentially funding increased public expenditure.
The proposed legislation, which has garnered support from both the Senate and the House of Representatives, seeks to implement a 12% value-added tax (VAT) on digital transactions conducted by non-resident digital service providers. The Senate made this announcement via its official Facebook page on Thursday.
This tax initiative could prove beneficial for homegrown streaming platforms while simultaneously affecting the expansion plans of global players like Netflix and regional provider Viu. These companies have been eyeing the Philippines, with its population exceeding 110 million, as well as the broader Southeast Asian market, as prime territories for growth. The region’s large, youthful demographic presents a significant opportunity for these digital services.
The potential financial impact of this tax is substantial. According to Congressman Joey Salceda, as reported by the Philippine Daily Inquirer, the measure could generate up to 18 billion pesos (approximately £257 million) in its inaugural year. The Department of Finance has projected even more optimistic figures, estimating a revenue of about 84 billion pesos from this year through to 2028. Notably, lawmakers have earmarked 5% of the collected revenue for the development of creative industries within the Philippines.
This tax proposal has been in consideration since the onset of the COVID-19 pandemic four years ago. However, it has gained renewed urgency as President Ferdinand Marcos Jr and his economic advisors face mounting pressure to increase state revenue. The administration aims to reduce the government’s budget deficit and manage the national debt more effectively. For the bill to become law, it now requires President Marcos’ signature.
The timing of this legislative move aligns with the budget department’s recent unveiling of a proposed 2025 national budget of 6.35 trillion pesos. This figure represents a 10% increase from the current year and surpasses previously announced estimates, reflecting plans for enhanced infrastructure spending.
