Memos from Asia

Digital Taxation to be Imposed in the Philippines

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It has been a few months since the COVID pandemic outbreak hit the world and we were forced to live in isolation from everybody else for our safety. Through these months, it was with the help of the internet that we were able to cope and live in the new normal situation that we have. We have social media applications that help us connect with family and friends, shopping platforms to help us buy our needs, and movies and music streaming applications to entertain us in the walls of our home. However, in the Philippines, these are seen by the lawmakers are potential sources of income.

Economic Crisis due to COVID

Antipolo City, Philippines – March 18, 2020: Customers line up with ample distance from one another outside a grocery in line with the government’s call for social distancing amidst the Covid-19 virus outbreak.

Since the beginning of the pandemic, the Philippines has had strict lockdowns for months, thus impairing a lot of business and the economy as well. The government has been in a financial tight spot with having to compensate for the everyday needs of the Filipino families whose livelihood was affected by the pandemic. This is the reason why the government has been exploring other ways to generate income for the country.

They saw an opportunity in digital transactions. Since digital transactions like subscriptions and purchases are not taxed, they plan to impose a 12% value-added tax on these transactions which the business can pass on to the consumer. An estimate of 10 billion pesos is expected from this implementation, which is roughly 205,918,500 USD. (CNN, https://www.cnnphilippines.com/news/2020/7/29/House-OKs-tax-digital-services-Netflix-Lazada.html)

Filipinos Reaction to the Tax

The government assures that as this tax is relative to living means, it will not further affect those that are already suffering from the recession. They see that those who have more money to spare are those that will be feeling the impact of the taxes. (Asian Review, https://asia.nikkei.com/Economy/Philippines-eyes-tax-on-Netflix-to-boost-revenue-amid-pandemic)

Despite this, there has been a huge upset over this which the citizens have expressed on social media.

Some are for this move since they see this as internationally owned businesses that should have been taxed long ago. Also, that these are also being done in other countries.

There are differing opinions on this matter, but the focus of everyone is the same, it is on what will help them cope in this pandemic. For the citizens, it is to preserve their source of entertainment, communication, and means to buy necessities. For the government, it is to address the deficit on financial funding of the country.

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