DOF: VAT on digital services to raise billions for gov’t
MANILA, Philippines — The imposition of value-added tax (VAT) on digital service providers can generate billions in revenue that may be beneficial to the country’s socio-economic programs, said the Department of Finance (DOF) on Thursday.
During the Senate committee on ways and means’ public hearing on Thursday, the DOF expressed its “full support” for Senate Bill No. 250 and House Bill No. 4122 — two measures that seek imposition of value-added tax on digital transactions in the country.
“The DOF fully supports these measures. We’d like to emphasize that this is to be distinguished from the digital services tax which is a form of income taxes imposed by other jurisdictions. We’d also like to emphasize that [these bills] do not impose new taxes but merely strengthen and streamline the Bureau of Internal Revenue’s authority to collect VAT on digital transactions by providing measures on how resident and non-resident digital service providers can comply with the VAT requirements imposed by the tax code,” said DOF Undersecretary Dakila Elteen Napao.
Digital service providers include online licensing softwares, website filters and firewalls, mobile applications, video games, webcast and webinars; digital contents such as music, files, images, text and information, electronic marketplace, search engine services, social networks, cloud storage services, online news papers, journal subscriptions and payment processing services, among others.
“Assuming that there will only be 70 percent compliance among those digital service providers, we note that in 2024 alone, there will be a P17.64 billion additional collection on the part of the government,” said Napao.
“Moving to 2025 [it may] grow to P18.96 billion until 2028 where there may be a total amount of P23.28 billion on a 70 percent compliance,” he added.
Senator Sherwin Gatchalian, chairman of the Senate committee on ways and means, said the committee is in unison with the national government in its quest to increase revenues to help support priority programs.
“But at the same time, we all acknowledge that the digital economy is moving so fast. Faster than the laws that we have already in place,” said Gatchalian.