Press Release - Chiz says VAT on digital transactions to level playing field, boost gov't revenues by P80-B

Senate President Francis "Chiz" G. Escudero said the bill imposing a 12-percent value-added tax (VAT) on digital transactions will level the playing field for local and foreign digital service providers (DSPs), streamline tax administration and shore up government coffers by at least P80 billion in revenues.

The VAT on Digital Transactions, a priority measure of the administration, is set to be signed by President Ferdinand Marcos on October 2 and is envisioned to capture revenues lost due to the vagueness of existing laws pertaining to taxation of e-commerce transactions, particularly foreign companies which are not based in the Philippines but provide services to local consumers.

"Lahat ng negosyo, malaki man o maliit, ay nagbabayad ng buwis. Hindi naman yata makatarungan na ang mga higanteng negosyante na hindi naka-base sa Pilipinas pero kumikita ng malaki sa pagbenta ng kanilang mga serbisyo sa mga Pilipino ay hindi sakop ng parehas na buwis. Pinapantay lang nitong bagong batas ang obligasyon sa pagbayad ng buwis sa lahat ng kumikita dito sa bansa," Escudero said.

The Senate President noted that other nations, including the neighboring countries of the Philippines, have been imposing the same tax on digital services and transactions now that consumption of the same has become almost universal.

Citing projections by the Department of Finance, Escudero said the imposition of VAT on these digital transactions could generate anywhere between P80 billion and P145 billion for the period of 2025 to 2028, depending on the compliance of the subject taxpayers.

The new measure amends certain provisions of the National Internal Revenue Code (NIRC) of 1997 to make the collection of taxes more equitable and attuned to the changes in the economic landscape brought about by rapid advances in the use of technology.

Under the enrolled bill, a consolidated version of House Bill No. 4122 and Senate Bill No. 2528, that was transmitted to the President for review and signature late last August, digital services are now explicitly part of the coverage of Philippine tax law and even non-resident DSPs who have no physical presence in the country but render services within the