Senate pushes VAT on Netflix, HBO

MANILA – The Senate has initiated deliberations on a proposed bill aimed at imposing a value-added tax (VAT) on foreign streaming platforms such as Netflix and HBO Gold that operate within the country.

During his sponsorship speech on Tuesday afternoon, Senator Sherwin Gatchalian emphasized that Senate Bill 2528, which seeks to amend the 1997 National Internal Revenue Code, is not a new tax measure but rather a means of ensuring taxation of digital service providers.

He explained that the bill aims to precisely define terms such as “digital service,” “digital service provider,” and “nonresident digital service provider.”

“With these definitions being clear, tax authorities can enforce the tax rules effectively and fairly to the digital service providers,” he said.

The senator highlighted that according to estimates by the Department of Finance, the government could potentially collect around P83.3 billion in taxes from 2024 to 2028 through this measure.

He emphasized that digital service providers have become deeply integrated into the fabric of the country’s existence, capturing interests, shaping social interactions, and influencing knowledge dissemination.

“For instance, from 2018 to 2022, the revenue generated from digital media increased by an average of 19 percent, reaching a staggering P78.2 billion – primarily stimulated by revenue from video games,” he said.

He pointed out that in accordance with the Tax Code, the sale of services performed in the Philippines is subject to VAT, and digital service providers, whether resident or nonresident, should be subject to VAT since they are sellers of services in the country.

“However, due to the ambiguity in the law, the taxability of nonresident digital service providers becomes unclear. As a result, nonresident digital service providers are not mandated to pay 12 percent VAT,” he added.

He said that “failure to impose and collect tax on nonresident digital service providers contradicts the fundamental principles of equitable taxation. It generates an imbalance between domestic and foreign service providers, placing local businesses at a disadvantage.”

“We have local platforms, like iWantTFC and Vivamax, providing digital services where users pay a subscription fee to stream and watch video content. Take note that these local streaming platforms are subject to VAT, as clearly stated in our Tax Code, highlighting the uneven playing field between local and nonresident digital service providers,” he said.

Based on the 2022 analysis conducted by the UK-based price comparison service Uswitch, the Philippines ranks as the third best country globally and the top country in Southeast Asia for having a Netflix subscription, considering factors like price and content variety.

Additionally, referring to the 1st quarter 2022 report from Statista, Netflix holds the highest market share among streaming services in the Philippines, with approximately 31 percent of Filipino subscribers.