MANILA - Netflix, Spotify, Facebook, Google and other global internet companies that do business in the Philippines will be subject to the value added tax and other duties under a bill filed by Albay Rep. Joey Salceda.
The Digital Economy Taxation Bill or House Bill 6765, aims to raise P29.1 billion in new revenues, said Salceda who chairs the House tax-writing panel.
But Salceda also clarified that the bill will not slap new taxes on internet firms, but will simply plug “loopholes due to ambiguities in what kind of taxes digital services are liable to.”
“Assuming you’re a company that sets up in the Philippines, and you do video-streaming or music-streaming services, you will definitely pay taxes. But companies like Netflix and Spotify don’t. That’s obviously not fair,” Salceda said in a statement posted on his Facebook account.
He added that Google and Facebook earn P50 billion from ads in the Philippines but are not subject to VAT.
Netflix earns P5 billion from subscriptions paid by Filipinos, Salceda said. But while Skycable pays VAT and income taxes, Netflix does not, he added.
E-commerce sites like Lazada and Shopee will also be tasked to collect taxes from their partners.
“Internet marketplaces like Lazada and Shopee are growing very rapidly due to COVID-19, but there may be issues of tax compliance among its partners, too. And we are not able to capture that because our current definitions do not include them as withholding agents kahit nahawakan na nila ‘yung pera (even if they’ve held the money),” Salceda said.
The bill, Salceda insists, will not create new taxes, but tax administration measures.
The bill will make “network orchestrators” like Grab, Angkas, Airbnb, Lazada and other similar services become withholding agents for income taxes and VAT.
It will also clarify that services rendered electronically in the course of trade or business are liable to Value-Added Tax (VAT).
The proposal will also subject to VAT digital advertising by internet giants such as Google and Facebook and subscription-based services such as those of Netflix and Spotify.
Social media users who do not advertise on these platforms will not be affected, he added.
“Kung regular user ka lang naman, hindi ka naman apektado. If anything, these social media platforms need you, the user, to keep using, so that they could earn from digital advertising, the same way TV networks need viewers so they could get advertising contracts. So, the usual social media channels will definitely remain free. The whole idea that somehow, this bill will make social media networks charge users who don’t advertise, that’s a bad reading of the proposal.”
Indonesia is also planning to impose a 10 percent VAT on digital services by foreign companies.
France enacted a similar digital tax last year, which prompted the United States to threaten to slap tariffs on French imports.