Albay 2nd district Rep. Joey Salceda (Rep. Salceda's office)

Albay 2nd district Rep. Joey Salceda underscored on Wednesday, Oct. 2 that the Philippine creatives sector--which covers artists, artisans, producers--were "the biggest winners" in President Marcos' signing of Republic Act (RA) No. 12023 or the Value Added Tax (VAT) on Digital Services Law.

Statement on the enactment of the VAT on nonresident digital service providers with the creatives industry fund

"I thank President Marcos for signing the VAT on non-resident DSPs (Digital Service Providers) with its earmarking of funds for the creatives sector," Salceda, chairman of the House Committee on Ways and Means, said in a statement.

Salceda was in Malacañang Wednesday morning to witness the signing of RA No.12023.

The law imposes a 12-percent VAT on DSPs to level the playing field for local providers and generate additional revenue that will be used to build more classrooms, health centers, and farm-to-market roads in the next five years.

The new statute covers popular media streaming platforms like Netflix and Spotify.

"For the longest time, our VAT system has taxed domestic creatives while allowing foreign companies to sell to Filipinos without any tax. This meant that our local creatives sector was competing with their hands tied behind their backs while foreigners had full access to our market," noted Salceda.

"The 12 percent difference in treatment is no small matter – indeed, before this law, it meant that foreign creatives in the digital space could be sold cheaper than their domestic competitors. The law ends this unfair treatment," added the Bicolano.

"Same product, same digital space, same consumers, same rules, same taxes. That is the logic and doctrine," he further noted.

"We believe the law will raise at least P8-12 billion in its first year, with the executive branch having bigger estimates.

"The logical next step for foreign digital service providers will be to sell their products through local partners, which will at least allow them to charge their local expenses as input tax. That is also good, because it will create jobs for local affiliates," Salceda said.

Salceda further said: "A 5 percent earmark for 10 years is also introduced. This will fund the creatives industry – one of the country’s most potent sources of growth."

He reckoned that the Philippines is ASEAN’s (Association of Southeast Asian Nations) largest creatives sector exporter. "We have an absolute advantage in this field due to our culture, predisposition, and multilingual society," said the former three-term Albay governor.

"It is time we invest heavily here – the way Korea did first in the aftermath of the 1997 Asian financial crisis, and then as a recovery measure during the 2008 Great Recession," Salceda said.

Regressive?

But not everyone finds sense with RA No.12023. According to former Bayan Muna Party-list Rep. Carlos Zarate, the law will have a regressive impact and place an undue burden on ordinary Filipinos.

"The imposition of a 12% digitax on digital goods and services is not the way forward. This measure will unfairly impact ordinary citizens, who will bear the brunt of increased subscription fees on platforms like Netflix and Spotify," Zarate asserted.

"Even digital platforms used to support education, such as Canva and Zoom, will be subjected to this tax unless they are used by accredited educational institutions," he said.