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As the Philippines begins enforcing a 12% value-added tax (VAT) on foreign digital service providers (DSPs), consumers are starting to feel the impact on their wallets.
Netflix was the first to announce a price hike, with its most affordable plan rising from PHP 149 to PHP 169 and its premium tier jumping from PHP 549 to PHP 619. The move comes in response to the new VAT law that took effect on June 2, applying to services such as streaming, cloud storage, online advertising, e-learning, gaming, ride-hailing, and more.
While some platforms like Steam have opted to absorb the cost without passing it on to users, experts believe more companies will likely follow Netflix’s lead.
“This is an indirect tax, and it’s typically passed on to the end user,” said Mon Abrea, tax reform advocate and chief advisor at Asian Consulting Group. “The law aims to level the playing field between local and foreign providers, but the Filipino consumer bears the real cost.”
Abrea estimates that the tax could generate over PHP 100 billion in additional government revenue money that could support the country’s digital infrastructure. However, he points out that most of this revenue will not come from big tech firms directly but from local subscribers footing the VAT.
This has led Abrea and others to advocate for implementing the OECD’s Global Minimum Tax, which ensures that multinational firms like Amazon, Google, and Facebook pay corporate taxes fairly in all countries where they operate.
Challenges in Execution
Despite the potential upside for government coffers, enforcement may prove difficult. Non-resident foreign firms lack a physical presence in the Philippines, making compliance hard to monitor. Some critics also say that placing compliance burdens on local businesses by requiring them to withhold and remit VAT is unfair and risks penalties if done incorrectly.
Meanwhile, digital professionals and small business owners are raising red flags. “Our subscriptions to essential tools like Adobe, Google Drive, and Canva Pro are getting more expensive,” said Abe Olandres of YugaTech. “This affects freelancers and startups who rely heavily on these services.”
Increased costs could also fuel a return to piracy, he warned.
Marketing professionals are similarly concerned. “Advertising budgets may shrink if VAT costs can’t be claimed back,” noted media buyer May Pearl Cariaga. “That could reduce business reach and growth potential.”
Government: “It’s Not a New Tax”
Philippine officials, including Finance Secretary Ralph Recto and Senator Sherwin Gatchalian, have clarified that the VAT on digital services isn’t a new tax but a correction of an outdated system.
“We’re just collecting taxes that should have been collected all along,” said Recto.
Still, with rising costs across essential goods and services, Filipino consumers now face higher digital subscription fees at a time when many are already financially stretched.
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