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Economy

Southeast Asia leans on new taxes to plug coronavirus shortfalls

Digital services and tourists targeted to help fund pandemic relief

Wat Po temple in Bangkok: Thailand is weighing a new entry tax for foreigners once tourism picks back up.   © Reuters

MANILA -- Southeast Asian countries have turned to new and higher taxes to offset falling government revenues due to the coronavirus pandemic, walking a fine line between securing funding and further straining economies.

The pandemic has dealt a heavy blow to the Southeast Asian economy, squeezing government revenues across the region. The Philippines, for example, suffered an 18% drop in tax revenue on the year in the January-April period.

"There is an urgent need to augment the government’s resources to sufficiently finance the government’s programs," Philippine President Rodrigo Duterte said in an executive order that slapped an additional 10% tariff on imported crude and petroleum products early this month.

The new tariff would add 6 billion pesos ($119 million) to government coffers if kept in place through the end of the year. The money will be used to secure medical equipment and to assist low-income households.

Some Philippine lawmakers are also pushing for a value-added tax on digital services provided by the likes of Facebook, Google and Netflix. The government announced May 20 that it is looking into the proposal.

Indonesia is one step ahead. Netflix, Zoom, Amazon.com and more will be subjected to a 10% value-added tax in the country starting July, as part of emergency measures announced back in March. The tax is expected to bring in 10.4 trillion rupiahs ($700 million) a year, or the equivalent of 0.5% of the government's total revenue in 2019.

Meanwhile, Thailand is tapping its tourism sector for government funding. The Thai government is weighing a new entry tax for foreigners once travel picks back up, which will be used to help tourist-related businesses hit hard by the coronavirus.

But any additional tax risks squeezing trade, investment and consumer spending, which in turn could hamper economic recovery. Governments face difficult decisions on how much new taxes they can impose, and for how long.

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