FILIPINOS can expect to see higher subscription fees from foreign digital service providers like Netflix after the implementation of a new law imposing a 12-percent Value Added Tax (VAT).
While Internal Revenue (BIR) Commissioner Romeo Lumagui Jr. initially stated that these companies might not immediately increase their prices, he acknowledged the possibility of future adjustments.
“In other countries, they [digital streaming companies] already pay taxes. So, we’re actually late to the game here. They already know this, so when they set their pricing, they probably factored in the VAT. So, the price might not increase, but of course, we can’t guarantee that,” Lumagui said in an interview.
He also clarified that the 12-percent VAT does not necessarily translate to a 12-percent increase in subscription fees.
“We can’t say for sure if they will actually raise prices,” Lumagui added.
However, Mon Abrea, founding Chairman and CEO of Asian Consulting Group, holds a different view.
“It’s a welcome development to expand the coverage of the Value Added Tax. The only caveat is, it has (an) unintended consequence, the price increase. Why would they absorb the 12-percent VAT? It will be a reduction to their margin,” Abrea said in an interview with ABSCBN News.
“For example, if a Netflix subscription is P500, they will just add 12 percent, making it P560,” he added.
Abrea also emphasized the need for clear mechanisms in the implementing rules and regulations of the law, outlining how the BIR will collect the VAT and how the local creative industry will benefit from it.
“For example, if Google doesn’t comply. Is it our fault, because we transacted with Google, (that) they didn’t issue an invoice, they didn’t charge 12 percent? It shouldn’t be the burden of domestic or local users… We might end up paying an additional 12 percent, and the government still won’t collect it. We lose in that situation, right?” he said.
