Manila City, Philippines–The Department of Trade and Industry (DTI) expressed its strong support for Republic Act (RA) No. 12023 which was signed by President Ferdinand R. Marcos Jr. on 02 October 2024. This landmark legislation levies a 12% value-added tax (VAT) on non-resident digital service providers (DSPs) like Netflix, Disney, and HBO.

As a priority measure of the administration, RA 12023 is a crucial step towards leveling the playing field for local digital platforms. By ensuring that foreign DSPs contribute their fair share of taxes, the law promotes healthy competition and allows local businesses to thrive.

Moreover, the law is expected to generate significant new revenue streams, valued at PHP 105 billion over the next five years.

In his message, President Marcos Jr. emphasized the importance of fairness in the digital economy.

“If you are reaping the rewards of a fruitful digital economy here, it is only right that you contribute also to its growth. Whether you are a small tech startup or a global tech giant based halfway around the world, if you are making money here in the Philippines, you’re a part of our community, and with that comes a shared responsibility,” the President stated.

Department of Finance projects a significant increase in revenue with the implementation of VAT on foreign DSPs. The projected revenue for 2025 alone is PHP 7.25 billion, assuming a 50% compliance rate.

Furthermore, the new law designates 5% of the expected total revenue to the Malikhaing Pinoy program, boosting the Philippine creative sector. This allocation will benefit over 7.26 million Filipinos employed in the Philippine creative industries. It provides wider support and opportunities for those involved in arts, entertainment, design, and media.

“This means our artists, filmmakers, musicians, the very people who fill our platforms with storage and content, will directly benefit. It ensures that our creative talents are not just surviving in a competitive digital market but will be allowed by fairness and progress,” the President emphasized.

Meanwhile, DTI Secretary Cristina A. Roque highlighted the broader implications of the law for local businesses.

“With a more competitive landscape, we can better leverage digital technologies to innovate, expand, and thrive in the global marketplace. Ensuring that all DSPs, regardless of origin, contribute their fair share promotes healthy competition, and supports the growth of our local enterprises,” said the trade secretary.

The DTI’s flagship initiative, the Malikhaing Pinoy Program, has been instrumental in developing the country’s creative industries. It provides local and global market access, masterclasses, policy support, creative cities grants, and mentorship opportunities. With the additional financial support from RA 12023, Malikhaing Pinoy is poised to expand its initiatives and empower the creative community to compete globally.

“We are thrilled with the inclusion of the creative industries in this new law. This is a significant win for our creative industries that work tirelessly to enrich world-class Filipino creative content on digital platforms,” said DTI Competitiveness and Innovation Group Undersecretary Rafaelita M. Aldaba.

“Through the intensified implementation of the Malikhaing Pinoy Program, we will be able to enhance our efforts in nurturing Filipino talent. Through this, we can also ensure that they thrive in local and global markets as they harness the potential of the country’s creative industry. Our goal is to establish the Philippines Asia’s premier creative hub by 2030,” Undersecretary Aldaba added.

The DTI remains committed to empowering Filipino creatives and fostering a sustainable and thriving creative industry through various projects under the banner of the Malikhaing Pinoy Program, including initiatives like The Young Creatives Challenge. ♦

Date of Release: 16 October 2024

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