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Digital’s survival

Our lawmakers better think long and hard about this measure that could kill off the digital upstarts.

John Henry Dodson



The fast-shifting digital and online landscape may slow down, at least in the Philippines, if and when a law is passed imposing a 12 percent value added tax on the sector.

While still unnumbered, a bill to that effect has already been approved by the House Ways and Means Committee to generate over P10 billion in revenues for the government.

The authors of the consolidated bill intended the measure to give the government extra money for its anti-coronavirus program.

There can be no faulting their objective, especially since vaccines against the virus are forthcoming. Whew, it’s about time! For those, we’d need billions of pesos to get our people vaccinated.

This early, pharmaceutical greed has already reared its ugly head with United States biotech firm Moderna saying it will not sell its vaccines at production cost. Understood!

Moderna has no patent yet under its name, and it cannot let this golden opportunity to charge $50 to $60 per vaccine pass by.

Its vaccine, the development of which is heavily funded by the US government, is also seen as Donald Trump’s ticket to reelection.

Moderna’s anti-COVID concoction may reach stratospheric pricing if ever it reaches our shores, thus for most Filipinos it would be the China-made vaccines. So, good luck to all of you xenophobes.

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Back to that 12 percent VAT on digital and online transactions, that may just throw a monkey wrench and turn the Philippines into a digital pariah among nations.

As technology breaks barriers and borders, this tax may just turn off technology players, although behemoths like Google, Facebook, Apple and Amazon can be expected to just ride along.

Why not? Most taxes are ultimately passed on to end-users, thus the four tech giants will have no problem with collecting VAT for the government. Consumers will groan with this planned new tax, but will ultimately bear paying it.

Netflix, Spotify and other entertainment streaming services that keep us sane during this pandemic are too good to lose just because of an extra 12 percent costing.

But what the proponents of this VAT on digital are not seeing is the very negative effect the measure will have on digital and online upstarts already shellacked, stymied and smothered by the tech giants.

Any wonder the aforementioned tech giants are facing antitrust investigations in Europe and the United States?

During a Google seminar I attended in Singapore pre-COVID, an expert on debunking fake news quipped with a wink on an eye how the giants are making it difficult for the small players to make money.

Mainstream media companies with digital presence (who hasn’t?) know this very well since companies do not want to buy digital ad spaces, which are then picked up by the tech giants for peanuts.

Why? Because no one can out-tech the tech giants. Only they can promise targeted advertising to the companies who then buy their services, knowing that their ads would pop up on potential buyers profiled by cookies.

Our lawmakers better think long and hard about this measure that could kill off the digital upstarts like already struggling media companies whose digital platforms are being threatened.

The proposed VAT application is so vast it covers the following: online licensing of software, mobile apps; video games; webcast and seminars, file sharing like music, movies, images; advertising platforms; electronic marketplaces; search engine services; social network services, website hosting; cloud storage services; online training; online newspapers, payment processing and journal subscription.

Now, feel free to add what I missed. Hell, I may not even be able to share this piece in the future without being slapped a 12 percent VAT.

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