House panel approves bill seeking to tax Netflix, other digital transactions

THE House committee on ways and means approved on Wednesday, July 29, 2020, a measure seeking to impose a 12 percent value-added tax (VAT) on digital transactions, including those made by foreign and local service providers like Netflix and Spotify.

The House panel, chaired by Albay 2nd District Representative Joey Salceda, passed the unnumbered substitute bill which was a consolidation of House Bills no. 6765, 4531, and 6944, and House Resolution no. 685.

The bill requires foreign and local online service providers to remit VAT on their monetary transactions such as subscriptions and in-app purchases. The bill defines digital services as "any service delivered or subscribed over the internet or other electronic network which cannot be obtained without the use of information technology."

It also defines digital service provider as "an entity which provides digital service or goods to a buyer through an online platform for purposes of buying and selling of goods or services or by making transactions for the provision of digital services on behalf of any person." The new bill seeks to impose tax on digital businesses like Spotify and Netflix that offer services in exchange for subscription fees.

“Digital service providers from outside gain profit from our constituents but they do not pay taxes. This bill levels the playing field for local digital service providers,” Deputy Speaker Sharon

Garin, who is one of the measure’s authors, said. Other digital services include online licensing of software, payment processing, journal subscriptions, online newspapers, e-learning, online training, file sharing, online data warehousing, database and website hosting, social network services, search engine services, advertisement platforms, webcasts, mobile applications, and video games.

According to Department of Finance (DOF) Assistant Secretary Daki Napao, the new measure could generate at least P10.66 billion new revenues for the government.

The P9.31 billion will come from the foreign electronic transactions, while the other P1.36 billion will be collected from local transactions. (SunStar Philippines)