2-10-2024 (MANILA) Philippine President Ferdinand Marcos Jr. has signed into law a measure that will impose a 12% value-added tax (VAT) on digital services provided by non-resident companies. This groundbreaking legislation, one of the first revenue-generating initiatives under Marcos’s administration, is set to reshape the digital economy landscape in the archipelago.
The new law casts a wide net, encompassing a diverse array of digital service providers. From streaming giants like Netflix, HBO, and Disney to online search engines, advertising platforms, and cloud service providers, the legislation aims to level the playing field between local businesses and international digital behemoths.
During the signing ceremony, President Marcos emphasised the rationale behind the new tax, stating, “If you are reaping the rewards of a fruitful digital economy here, it is only right that you contribute also to its growth.” This sentiment underscores the government’s intent to ensure that global tech companies contribute their fair share to the Philippine economy.
The Philippines, renowned for its citizens’ prolific mobile phone usage, sees this move as a strategic step towards tapping into the burgeoning digital market to fund crucial infrastructure projects and other governmental initiatives. With fiscal constraints looming, the administration views this tax as a vital source of revenue.
According to projections from the Finance Department, the VAT on foreign digital services is expected to generate a substantial 79.5 billion pesos (approximately US$1.4 billion) in revenue over the next four years. This influx of funds could prove instrumental in supporting the country’s development goals and public services.
The implementation of this tax aligns the Philippines with a growing global trend of countries seeking to regulate and derive revenue from the digital economy. As more nations grapple with the challenges of taxing multinational tech companies, the Philippine model could serve as a blueprint for others in the region.
However, the move is not without potential challenges. Critics may argue that the additional tax burden could be passed on to consumers, potentially affecting the affordability of digital services in a country where internet access is already a contentious issue.
