The Philippine retail industry is expected to increase its contribution to the gross domestic product (GDP) to 20 percent by end-2024 or early 2025 from 18.6 percent share in 2022.
Philippine Retailers Association (PRA) president Bobby Claudio attributed the growth to the accelerated development of online platforms.
“We’re seeing retail contribution to the GDP increasing by 1 to 2 percent annually as online retailing hastened the development of the industry,” Claudio said as he underscored the industry’s significant tax contributions, averaging P750 billion annually between 2017 and 2022.
The PRA, however, raised concerns about the uneven playing field between brick-and-mortar stores and online sellers, especially those based overseas.
It said that while traditional retailers pay various taxes, including VAT, income tax, municipal tax and excise duties, many online sellers, especially those on foreign platforms, often operate without paying these taxes.
The situation led to a price advantage for online sellers, particularly those based abroad, who can offer their products at significantly lower prices than physical stores. Claudio said.
“Our lament, our concern, is that since no transitionary measures are imposed on VAT and duties for online sellers, we feel businesses are being taken out of brick and mortar,’” Claudio said.
The PRA estimated the price difference at more than 17 percent, representing the combined VAT and duties that traditional retailers are subject to.
To address this issue, the PRA is advocating for the swift passage and implementation of the Digital Transactions Act of 2023, which would require foreign merchants operating on online marketplaces to register with the Department of Trade and Industry (DTI) and the Bureau of Internal Revenue (BIR) and comply with tax regulations.
“We expect consumer pushback, but for me, we have a VAT system, and everyone has to have a share in nation-building,” Claudio said.
The PRA expects the online retail’s share of the market to keep growing and reach around 25 percent in the next three to five years, similar to the trends in the US and Europe.
