Philippines moves closer to taxing tech giants

MANILA:

A proposed bill that will allow the Philippines to tax tech giants like Facebook, Alphabet’s Google and Youtube, and Netflix, moved a step closer to becoming a law after a lower house committee approved it on Wednesday.

The bill, which aims to raise 29 billion pesos ($590 million) to help fund government measures to fight the coronavirus, follows similar plans by other Southeast Asian countries to generate revenues from the most popular digital services.

“If brick-and-mortar establishments, which are the hardest-hit by the pandemic, have to pay VAT, the giants of e-commerce should not be exempt,” Congressman Joey Salceda, the bill’s principal author, said in a statement.

The bill proposes value-added tax of 12% on digital services. It still needs to clear the lower chamber and a similar bill has been submitted to the Senate.

Starting next year, Salceda said, funds raised from new taxes would also be used to finance digital programmes such as a national broadband project and digital learning, to fill the education gap caused by school closures due to the virus.

The Philippines is a growth area for big tech firms, with Filipinos among the heaviest social media users in the world.

Facebook, Google, Youtube, Netflix, Spotify and Alibaba’s Lazada did not immediately respond to requests for comment.

Tech giants are increasingly facing tougher fiscal regimes in Southeast Asia, whose regulators held talks last year on a region-wide effort to tax tech giants more.

In May, Indonesia announced plans for VAT of 10% on digital products to boost revenues amid the pandemic.

Thailand in June approved a draft bill requiring foreign digital service providers to pay VAT of 7%.