LGUs urged to pass 'Netflix tax'

Feb 23, 2021, 4:26 AM
James Veloso

James Veloso


A government think tank now believes LGUs should impose a tax on streaming sites to offset losses from suspension of movie theaters.

Taxing streaming sites could boost LGU's revenues, gov't think tank says

DESPERATE to generate revenue from the entertainment industry that was crippled by the still lingering pandemic, some lawmakers last year introduced legislation imposing a tax on online streaming websites such as Netflix.

The online streaming websites caught the attention of lawmakers after they gained popularity from viewers who were whiling away their time and were looking for some entertainment at the height of the pandemic.

The legislation died after public clamor against the tax, which netizens say adds another burden to a populace already under the grip of the economic impact of the pandemic.

However, a government think tank now believes the "Netflix tax" could be implemented, albeit at the local government level.

In a report released last week, the National Tax Research Center (NTRC) said it believes local taxes on streaming sites could offset the losses from the suspension of live shows and cinemas due to the pandemic

While the gradual easing of lockdowns has allowed some malls and movie theaters to restart operations in some parts of the country, LGUs would have to find ways to recover reliable income that could have otherwise come from amusement taxes, it explained.

For instance, NTRC said “there are online streaming shows that can still be classified as sources of amusement.” LGUs “can tap these sites as sources of tax revenues as the country enters the chapter of the ‘new normal’,” it added.

The think tank, cited for example, Chicago’s ruling to collect local amusement taxes from video sites and subscription channels.

Aside from the national amusement tax prescribed by the Tax Code, a local levy is also imposed by provinces, cities and municipalities under the Local Government Code of 1991.

National amusement taxes cover the income of TV, radio and movie producers as well as cockpits, cabarets and clubs, jai alai, professional basketball and boxing games.

Review the law

Local governments, on the other hand, cover sales of cinemas and theaters, concert halls, circuses and boxing arenas, among other amusement places, according to the NTRC.

“Congress should consider reviewing the Local Government Code to align the limitations and taxing powers of LGUs to modern business models” in a bid to widen their tax base, the NTRC said.

Prepandemic, the national government collected amusement taxes averaging P134.5 million yearly from 2014 to 2018, while LGUs had a bigger combined annual average take of P887.72 million in the same period, the NTRC said.

Yearly collections from national and local amusement taxes also rose by an average of 10.71 percent and 7.76 percent, respectively, during the period.

Past efforts

Last May, Albay representative Joey Salceda introduced a bill in Congress seeking to tax not only online streaming services but also advertisements on websites and other digital services.

The taxation of digital services, Salceda argued, could yield an estimated P29.1 billion annually for the government.

However, some government officials believe the measure would only stifle the country's digital sector which had seen a boost since the COVID-19 pandemic began last March. (JV)

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