The House of Representative on Ways and Means approved a bill that seeks to impose a 12% value added tax (VAT) on digital service providers. The bill was approved to increase revenues that was affected by the Covid-19 pandemic.

Digital Service Provider in definition from the bill is “ 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”

Foreign digital service providers such as Netflix, Spotify, Lazada, and others are to assess, collect and remit the VAT on the transactions that go through its platforms.

However, House Panel chairperson Joey Salceda, Albay District Representative clarified that this should not be considered as a new tax because it only addresses the loopholes for large foreign corporations in the proposed Digital Economy Taxation Law.

Small online businesses that does not exceed the P3 Million threshold and bar trading will not be affected by the proposed measure. It was also mentioned by Salceda that the 70 percent of the revenues will mostly come from the upper middle-income families and above which means that the income tax rate for those in the lower-income classes will be small.

The said measure, if passed into a law will increase a P10 Billion revenue for the government and P9 Billion of which will be coming from foreign companies that are based here in the Philippines.