QUEZON CITY (PIA) — The newly-signed Republic Act (RA) No. 12023, or the Value-Added Tax on Digital Services, will boost the government’s thrust to build more schools to provide accessible and quality education for all Filipinos, construct farm-to-market roads to increase rural productivity, establish modern hospitals to ensure healthcare nationwide and support vital socio-economic programs.
The new law, though not a new tax measure, is expected to result in an estimated revenue collection of P7.25 billion in 2025, at 50 percent compliance.
During the signing of the law on October 2 in Malacanan, President Ferdinand R. Marcos Jr. said, “For the next five years, we estimate to collect 105 billion pesos from this measure. This is enough to build 42,000 classrooms, more than 6,000 rural health units, and 7,000 kilometers of farm-to-market roads.”
“Additionally, five percent of the revenues generated by this law will be allocated to our creative industries,” the president further said.
The new law levels the playing field between local and foreign digital service providers (DSPs). At present, only local DSPs are subject to paying the 12 percent value-added tax.
The president added, “[W]e are not imposing new taxes; we are simply strengthening the authority and streamlining the process of the BIR to collect value-added tax on digital services. This includes digital media, digital music, digital video, video-on-demand, and digital advertising.”
He noted that local businesses and international digital platforms now compete on equal terms, saying, “We no longer will be playing by different sets of rules. If you are reaping the rewards of a fruitful digital economy here, it is only right that you contribute also to its growth. After all, whether you are a small tech start-up or a global tech giant based halfway around the world, if you are making money here in the Philippines, you are part of our community. And with that comes a shared responsibility.”
In support of the Marcos, Jr. administration’s priority to keep education accessible and affordable for all, the law exempts educational services, including courses, webinars, and other digital educational offerings, from value-added tax. Moreover, digital services sold on a subscription basis to educational institutions recognized by DepEd, the CHED, and SUCs are also not subject to value-added tax.
For the next five years from the law’s effectivity, 5 percent of the collected revenues will be used exclusively for the local creative industries’ development to foster innovation and empower the next generation of Filipino creators and entrepreneurs.
Finance Secretary Ralph G. Recto, for his part, said, “We are just merely correcting the current system that creates an unfair advantage to foreign digital service providers and weakens the country’s tax base, forgoing much-needed revenues that could have been used to fund crucial public services, infrastructure, and other socio-economic programs.”
Recto added, “By doing this, we foster fairness, competition, and inclusion in our tax system and marketplace.” (PIA DMD)
