Beyond Netflix, Lazada: Here's What Else the 12% VAT Would Cover

Turns out "digital services" covers a pretty wide range.

ILLUSTRATION War Espejo

(SPOT.ph) Online streaming and shopping platforms such as Netflix and Lazada have become pretty much everybody's best friends during the quarantine—but it seems something might just drive a wedge into this relationship. The House Committee on Ways and Means approved a still unnumbered bill that seeks to impose a 12% Value Added Tax on digital transactions on July 29. If enacted into law, simply speaking, this means consumers will be paying more for their daily dose of content and a bunch of other things we need the Internet for. 

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The approved bill aims to amend the National Internal Revenue Code of 1997, imposing taxes on transactions done by digital service providers—specifically for global companies such as Netflix, Spotify, Facebook, Google, and the like. These taxes could generate around P10.66 billion, noted Albay Representative Joey Salceda, chair of the committee and a principal author of the bill.

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"The objective of the bill is to level the playing field. If you are making profit from here selling to Filipinos, you have to pay taxes here," said Representative Sharon Garin, also one of the bill's authors. She noted that the bill aims to impose the tax on large global players, not small-time sellers, though, the proposed bill states that "The value-added tax [VAT] is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee of lessee of the goods, properties or services."

While it's clear that streaming platforms such as Netflix—whose services have long been included in taxable digital transactions across the globe, in countries such as New Zealand, Japan, Australia—would be included in this proposed bill, there are many other services included under the proposed 12% VAT rule.

The amendment defines a "digital service" as "any service that is delivered or subscribed over the internet or other electronic network and which cannot be obtained without the use of information technology and where the delivery of the service may be automated." We know, it's a lot of words, but it also contains an exhaustive list of online services that would become taxable if the bill becomes law. Included are online courses, games and mobile applications, Cloud storage services, and more. Check out the full list below:

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  • online licensing of software, updates, and add-ons
  • website filters and firewalls
  • mobile applications, video games, and online games
  • webcast and webinars
  • provision of digital content such as music, files, images, text and information
  • advertisement platform such as provision of online advertising space on intangible media platform
  • online platform such as electronic marketplaces or networks for the sale, display, and comparison of prices of trade products for services
  • search engine services
  • social networks
  • database and hosting such as website hosting
  • online data warehousing
  • file sharing and Cloud storage services
  • Internet-based telecommunication
  • online training such as provision of distance teaching, e-learning, online courses and webinars, online newspapers, and journal subscription
  • payment processing services

Books, newspapers, magazines, or bulletins sold electronically would be exempt from the proposed 12% VAT. While taxing digital transactions isn't exactly a new concept, the timing seems to add insult to injury. With everyone grasping for stability amid a pandemic, more taxes on people are probably the last thing we need right now.

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