Business & Economy

Tech giants forced to pay VAT in Southeast Asian economies

Bangkok, Jun 17 (efe-epa).- Southeast Asian economies are forcing tech giants to pay value-added tax (VAT) in a region where the digital services sector will reach a value of around $ 300 billion by 2025.

Until recently, digital service providers like Google, Facebook, Amazon and Netflix were not required to pay indirect taxes in many Southeast Asian countries, but more and more economies in the region are seeking to boost tax revenues by reviewing fiscal laws.

Thailand has become the latest country to pass a bill to apply a 7 percent VAT to sales made by non-resident companies and digital platforms, a move that is expected to raise some $96 million annually.

The rule will apply to foreign companies that earn over $57,000 each year in Thailand and will include e-commerce, video-streaming and online hotel rental services, among others.

Until now, only companies with a physical presence in Thai territory were required to collect VAT from consumers.

Following economic losses and the creation of aid packages worth millions to tackle the coronavirus pandemic, Thailand and other countries in the region hope these new indirect taxes will help cushion the impact of the financial crisis on state coffers.

The deputy spokesperson of the Thai Government, Ratchada Thanadirek, told Efe that the process of Parliament passing the bill into law can take between a few months to a year and that lawmakers hope it will come into force in 2021.

The bill has been criticized by the Asian Internet Coalition (AIC), an association that represents global digital companies including Google, Facebook, Airbnb, Grab, Line and Booking.

“The AIC is concerned that this new draft bill will lead to increased costs for Thai consumers and will hurt Thai SMEs that rely on global platforms to do business,” Jeff Paine AIC managing director said in a statement.

The AIC is also concerned with a similar law that was passed in Indonesia, the largest market in the region with 267 million inhabitants, and imposed a 10 percent VAT on digital products and services.

Singapore began charging digital consumer taxes on big tech companies in January and is expecting to collect $65.5 million annually.

Malaysia also started collecting a similar tax in January and is aiming to net some €496 million yearly.

“The purpose of consumption taxes is to tax where consumption occurs,” Cristina Enache, an economist at the Tax Foundation and professor at the University of Navarra (Spain) told Efe.

The expert said that these digital taxes are “a neutral broadening of the tax base,” so they seem preferable to other initiatives that seek to tax income from digital services.

Vietnam and the Philippines are also looking for ways to collect VAT on sales of digital services which boasts 360 million internet users, just over half the total population of both economies.EFE-EPA


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