Govt can levy additional taxes on digital services like - Salceda Netflix, Lazada, FB Ads

Simply justified in two words it’s the “new normal.”

As the country tries to adapt to the new norm for the society brought about by the coronavirus pandemic, so should we also think of new ways to go about regarding our survival as a nation.

And since taxation has been dubbed as the lifeblood of any government, Albay representative Joey Salceda, the House of Representative ways and committee chair is pushing for a new source of industry/sector that can be taxed by the government for the country’s national treasury.

(photo credit to owner)

Salceda is proposing to a taxation scheme for all digital services - specifically, subscriptions to video and music streaming apps, ads on social media sites, and making online sales platforms as withholding tax agents— with the rationale of offsetting the P120 billion in foregone revenues once the government cuts corporate income taxes to 25 percent to soothe the pain inflicted by COVID-19 on businesses.

Salceda intends to call these new tax measures as “Netflix tax,” “Facebook ads tax,” and the "Lazada Tax", respectively.

Salceda makes an example of the “Netflix Tax”, the worldwide current standard digital services tax slapped on subscriptions worldwide was 5 percent, although in Chile is much higher at 19 percent.

If the Philippine would slap a new 12-percent tax on subcriptions to video and music streaming sites, its worthy to note that said market is worth about P5 billion.

For “Facebook ads tax,” Salceda said the idea was to “require that digital advertisements be made through a country representative of Facebook and Google so it becomes least problematic.”

As of the moment the country does not have any scheme to levy any tax on the subscription fees being collected by apps like Netflix or Spotify.

Salceda reasons out that if the country would levy a 12-percent value-added tax (VAT) and corporate income tax among digital advertisers will augment the current revenue base

“The big money is in finding a way to tax the advertising on Facebook and Google,” Salceda said,

These two tech giants currently dominates the country’s internet space.

For the “Lazada tax,” the solon noted that only 50 percent of vendors who sell their goods and services via online marketplaces like the Alibaba Group’s Lazada, Amazon, and Shopee, among others, pay VAT.

Among online sellers, “around half are fully-compliant [with VAT payments] since they are large taxpayers and accredited shops,” he said.

Salceda bats for the 50% non paying VAT online platforms to be tapped to also serve as the withholding tax agents of their suppliers.

To put things in perspective , the sales of the country’s e-commerce sector estimated to reach about P260 billion this year, VAT collections should reach around P30 billion, Salceda said.

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Report from PDI

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