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Philippine Lawmakers Approve Tax on Foreign Digital Services
Philippine lawmakers have given their approval to a joint bill designed to tax foreign digital services such as Netflix, HBO, and Disney. This initiative aims to create a new revenue stream to support additional government spending.
Details of the Bill
The proposal, which has gained backing from both the Senate and the House of Representatives, intends to impose a 12% value-added tax on digital transactions performed by non-resident digital service providers, including major streaming platforms. The Senate announced the approval via its Facebook page on Thursday.
Impact on Domestic and Global Players
Imposing such a tax could foster growth among domestic streaming platforms within the Philippines. Meanwhile, global giants like Netflix and regional services such as Viu are keen to expand in the Philippines and the larger Southeast Asian market, seeing immense potential in the region's large, youthful populations.
Projected Revenue
The proposed tax is anticipated to generate as much as 18 billion pesos (approximately $307 million) in its first year of implementation. Further estimations by the Department of Finance suggest that the move could bring in around 84 billion pesos in revenue from the enactment year through 2028.
Allocation of Funds
Lawmakers have indicated that about 5% of the collected revenue will be directed towards bolstering the creative industries, which may include local content production and related initiatives.
Context and Historical Background
The concept of taxing foreign digital services has been considered since at least the start of the pandemic, which began four years ago. Nonetheless, the urgency has increased as President Ferdinand Marcos Jr. and his economic team face growing pressure to boost government revenue. The aim is to tackle the budget deficit and manage national debt effectively.
Next Steps
For the bill to be enacted into law, it will require the signature of President Ferdinand Marcos Jr.
Future Budget Plans
Simultaneously, the budget department has revealed a proposed national budget for 2025 amounting to 6.35 trillion pesos. This marks a 10% increase from the current year’s budget and surpasses earlier estimates, reflecting plans to amplify infrastructure spending.
