Retailers see share of GDP growing despite lack of tax on online sellers
THE Philippine Retailers Association (PRA) said it expects the retail industry’s contribution to the economy to grow by at least one percentage point this year even in the absence of a tax regime for its online competitors.
PRA President Roberto S. Claudio told reporters on the sidelines of the National Retail Conference and Expo that the retail industry accounted for 18.6% of gross domestic product (GDP) in 2022.
“It will keep growing. The GDP contribution of retail has been going up at least 1-2 percentage points a year. So we feel that by the end of 2024, that should move up to about 20%,” Mr. Claudio said.
Citing data from between 2017 and 2022, he said that taxes paid by retailers in the Philippines averaged P750 billion over the five-year period.
“These are a mix of value-added tax (VAT), income tax, municipal tax, excise tax, and whatever taxes that are being paid,” he said.
However, he said that the government’s revenue from retailers could decrease over time if it does not create a level playing field with online merchants.
“Since online transactions are not charged VAT and duties, we feel that what is happening is business is being taken away from brick-and-mortar stores because (and) moving online,” he added.
He said that the government is missing out on the opportunity to benefit from the growth of online e-commerce, on which no taxes and duties are imposed.
“We cannot compete with the prices online because the online sellers are not paying VAT and duties,” he said.
“We pay 12% for VAT, and other products even have 5% duties, so easily (online is) 17% cheaper,” he added.
A measure that seeks to impose a 12% VAT on foreign digital service providers was approved by the bicameral conference committee on June 27 and is now awaiting the signature of President Ferdinand R. Marcos, Jr.
Mr. Claudio said the measure could result in a pushback from consumers, though the government must address the revenue it has been forgoing.
“It deprives the government of the revenue. And, because the traditional retailers are losing out to online, over time, our sales will fall. And, when our sales fall, our tax declarations will also go down,” he said.
“Our appeal is for leveling the playing field. It’s up to the government whether they want to earn revenue or not. Because you can just imagine how much revenue the government is losing out on simply because it cannot impose VAT on foreign merchants,” he added. — Justine Irish D. Tabile