Retailers cheer VAT on digital services

MANILA, Philippines — The country’s group of retailers cheered the signing of the law imposing value-added tax (VAT) on digital services as this would create a level playing field and contribute to government revenues.

In a Viber message, Philippine Retailers Association president Roberto Claudio said the group commends the Congress, Department of Trade and Industry, Department of Finance and Office of the President on the passage and signing of this bill imposing VAT on digital services.

“On behalf of the business community  and retailers in the Philippines, this now levels the business environment between  local retailers and online foreign merchants,” he said.

Claudio said the law would also substantially boost tax revenue for the government’s social  and educational programs.

Earlier, he said orders placed through online marketplaces, unlike those sold by brick-and-mortar stores, are not being subjected to VAT, creating an unlevel playing field for existing brick and mortar stores in the country.

He said such prevents physical stores from competing with the low prices offered by online foreign merchants.

Claudio also said the government is deprived of revenues as traditional retailers lose out to online sellers, report lower sales and in effect, lower tax declarations.

The VAT on Digital Services Law aims to strengthen the authority of the Bureau of Internal Revenue (BIR) to collect VAT on digital services, including digital media, digital music, digital video games, video-on-demand and digital ads.

It covers digital platforms including Netflix, Spotify, Amazon and Lazada.

Digital educational services, including online courses and webinars offered by private institutions and the sale of online subscription-based services to educational institutions recognized by government agencies, however, are exempted from the law.

Under the law, the BIR commissioner can suspend the business operations of non-compliant taxpayers, as well as block the digital services of non-compliant service providers.