By DOMINIC GUTOMAN
Bulatlat.com
MANILA – A digital rights group said that the value-added tax (VAT) on digital services will only add burden to consumers in the face of increasing prices of commodities.
Ferdinand Marcos Jr. signed the Digital Services Act or Republic Act No. 12023 on Wednesday, October 2, imposing a 12-percent VAT on foreign digital service providers, with the aim of generating “additional revenue and level[ling] the playing field for local providers.”
“It is only right to tax foreign companies, but it should be in the form of corporate tax, not VAT, which is simply passed on to consumers,” digital rights group Computer Professionals’ Union (CPU) said.
In the Philippines, VAT is an indirect tax on goods and services. A percentage is added to what consumers would pay for goods and services, which businesses would then remit to the Bureau of Internal Revenue (BIR).
Digital services are services availed by consumers and delivered via the Internet or electronic networks using information technology. Examples of digital services levied for VAT are digital goods and platforms (e.g. Canva), e-marketplaces (e.g. Shein, Temu, Amazon, Lazada and Shopee), cloud services, streaming services (e.g. Spotify, Netflix), online media, and advertising.
“The tax should be collected to the big corporations themselves and the government should lower the VAT and other taxes to basic commodities,” CPU said.
For his part, former Bayan Muna Rep. Carlos Zarate stressed the regressive impact on ordinary consumers. “The imposition of a 12% digitax on digital goods and services is not the way forward. This measure will unfairly impact ordinary citizens who will bear the brunt of increased subscription fees on platforms like Netflix and Spotify.”
He added that there are digital platforms being used to support education, particularly Canva and Zoom, which may be subjected to tax unless they are accredited by educational institutions.
The law will exempt educational and public interest services recognized by the Department of Education (DepEd), Commission on Higher Education (CHED), and Technical Education and Skills Development Authority (TESDA). Most of these services are online courses, webinars and other digital education offerings.
Apart from the corporate income tax, Zarate said that wealth tax should be considered if the government wants to generate more revenues. “This would generate around P98 billion by imposing a tax on the top 20 billionaires. This should be the focus.”
A wealth tax is imposed on an individual’s net worth (including tangible and intangible wealth), which is a form of social justice measure and progressive taxation to address exacerbating inequality, according to a 2023 study of UP Center for Integrative and Development Studies (CIDS). It was also proposed as a measure in the European Union Tax Observatory to have a global minimum tax on billionaires equal to two percent of their wealth.
“Wealth taxes are meant to move society in the opposite direction—that of promoting equality. Wealth tax revenues are to be used by governments principally to promote social equity by reducing disparities in wealth holdings,” the paper read.
The “Super Rich Tax Act” (House Bill No. 10253) filed by the Makabayan bloc remains pending despite calls by the progressive lawmakers to certify it as urgent. This law aims to impose one to three percent tax on the wealth of billionaires to fund medical assistance (60 percent) and education, social protection, employment, and housing (40 percent). (RTS, RVO, DAA)
