Politics

ADB urges Philippine gov’t to broaden online tax take

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Figures are seen in front of displayed social media logos in this illustration taken on May 25, 2021. — REUTERS

THE PHILIPPINE government must consider expanding taxes for digital services and enhance revenue collection efforts, an Asian Development Bank (ADB) official said.

“We know with just from the COVID [pandemic,] the proliferation in some of the consumption on online consumption and buying… so I think that’s an area where we could look at, probably broadening the tax take there,” ADB’s Philippines Country Director Pavit Ramachandran told a media briefing on Thursday.

The Department of Finance (DoF) has included the proposed value-added tax on digital service providers (DSPs) in its list of priority measures.

The DoF earlier said it “seeks to level the playing field between local and foreign DSPs by clarifying that services provided by the latter in the country are subject to VAT.” It estimates that the VAT on nonresident DSPs will generate P83.8 billion in revenues from 2024 to 2028.

The House of Representatives approved House Bill No. 4122, which seeks to impose a 12% VAT on digital service providers, on final reading in late 2022.

A counterpart measure is still pending at the Senate plenary for second reading.

The Development Budget Coordination Committee revised its budget deficit ceiling to P1.48 trillion this year from P1.39 trillion set previously. The government aims to collect P4.27 trillion in revenues, and at the same time, spend P5.75 trillion this year.

“What needs to happen, in parallel, is obviously boosting the private sector side. Because that would ensure that you’re getting the return on some of these infrastructure investments,” Mr. Ramachandran said.

“It’s about having adequate fiscal space to continue prioritizing the essential expenditures,” he added.

The government must prioritize spending in agriculture, health, education and infrastructure, Mr. Ramachandran said.

“We are seeing a lot of educational outcomes still impacted by the scarring from COVID and some of the labor market outcomes as well,” he added.

The Philippines still lags behind its regional peers as an investment destination, according to the ADB’s latest Asian Development Outlook. 

Fixed investments in the Philippines was estimated at around 20% of GDP since 2013, lagging behind neighbors such as Vietnam and Indonesia where fixed investments account for 30% of GDP. — BMDC