The Market Monitor Minding the Nation's Business
The government is expressing optimism that the recently enacted VAT on Digital Services Law will not hinder President Ferdinand R. Marcos Jr.’s ongoing initiatives to attract foreign investors to the Philippines’ burgeoning digital market.
During a press briefing held at Malacañang, Bureau of Internal Revenue (BIR) Commissioner Romeo Lumagui Jr. addressed potential concerns from investors, asserting, “We are confident that this will not discourage them from coming here in the Philippines.”
Lumagui explained that the introduction of VAT on digital services aligns with international norms, underscoring that it is a standard practice worldwide. He clarified that this law specifically enhances the BIR’s authority to collect taxes on digital services effectively.
Historically, many digital service providers operating in the Philippines without a physical presence were exempt from taxation, which created an uneven playing field. Lumagui highlighted that this new law represents a significant move towards fairness in the digital marketplace.
Under Republic Act 12023, a 12 percent VAT will now be imposed on digital services offered by both resident and non-resident providers. This measure aims not only to level the competitive landscape among service providers but also to generate additional revenue that can be allocated to various government projects,
thereby contributing to national development.
The government believes that these changes will foster a more robust digital economy while maintaining an attractive environment for foreign investments.
President Marcos, meanwhile, expects the VAT on Digital Service Law to generate P105 billion in additional revenues for the government within the first five years of its implementation.
The Chief Executive stated that the revenue generated from the newly signed law would help the government allocate funds for the construction of approximately 42,000 classrooms, 6,000 rural health units, and 7,000 kilometers of farm-to-market roads.
President Marcos emphasized further that the new measure will also provide funding for the creative industry, ensuring that “creative talents can not only survive in a competitive digital market but thrive as well.”