MANILA - Streaming apps like Netflix and Spotify, as well as other digital services, may soon be slapped with a 12 percent value-added tax.

The House of Representatives on Monday voted 253-4-1, to approve on third and final reading House Bill 4122, imposing VAT on nonresident digital service providers (DSPs).

Under the bill, a 12 percent VAT is imposed on registered nonresident DSPs except for those providing services to the government which will need to pay only 5 percent VAT.

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Nonresident DSPs are required to register for VAT if gross sales or receipts for the past year have exceeded P3 million.

Subscription-based digital services, online advertisement services, and other electronic services that can be delivered through the internet are covered.

Meanwhile, it exempts educational services including online courses and webinars of private institutions from VAT, as well as the sale of online subscription-based services to educational institutions recognized by the Department of Education, Commission on Higher Education, and state universities and colleges.

It also simplifies invoicing and registration requirements for VAT-registered nonresident DSPs.

The bill also mandates that 5 percent of the incremental revenues from the measure will be used for the ‘creative industries development fund’ under Republic Act 11904.

According to the House website, the bill aims to level the playing field between traditional and digital businesses by clarifying the imposition of VAT on DSPs. It also aims to generate revenues to fund the country's efforts to recover from the adverse impact of COVID-19.

MAKABAYAN BLOC REJECTS 'DIGITAX'

The Makabayan bloc voted against the bill calling it “another regressive tax measure.”

Gabriela Rep. Arlene Brosas said that while they agree that the playing field must be fair, especially to local online digital service providers who are already paying VAT, levying a new tax “is not the way forward."

"Yung mga ordinaryong mamamayan pa rin ang papasan ng 12 percent ‘digitax’ na ito sa porma ng mas mataas na subscription fees sa online platforms tulad ng Netflix at Spotify,” Brosas said.

(Ordinary people will have to shoulder the 12 percent digitax through higher subscription fees on online platforms like Netflix and Spotify.)

She said the tax will be imposed even on platforms like Canva and Zoom which are used as aids in education, except when accredited institutions use these apps.

Brosas instead proposed a wealth tax.

"Sa halip na digitax, mahigpit ang assertion namin na dapat ikunsedira ang wealth tax na tiyak na lilikha ng mas malaking revenues kumpara sa panukalang digital tax. Mas ito sana ang ikunsidera natin," Brosas said.

(Instead of a digitax, it is our firm assertion that a wealth tax be considered, which can generate bigger revenues than the proposed digital tax.)

Around P98 billion will be generated by imposing a wealth tax on the top 20 billionaires, Brosas said.

The bill will be sent to the Senate for action.

The administration of President Ferdinand Marcos Jr. is eyeing several new taxes to help pay for the country's ballooning debt which already hit a record P13.52 trillion in September.

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