Traditional Retailers' Share To GDP Expected To Surge To 20% In 2024

The Philippine Retailers Association (PRA) remains optimistic that their sector will steadily contribute to the Philippine economy, with their share of the country’s gross domestic product (GDP) potentially increasing to 20 percent as early as this year or in 2025, according to the group’s president, Mr. Robert Claudio.

The contribution of the retail sector in terms of government revenues could be larger if online transactions were subject to taxes like those paid by brick-and-mortar stores. I Photo: SM MEGAMALL Facebook

He noted that this would be a significant surge compared to the 2022 level of 18.6 percent.

“The GDP contribution of retail has been increasing by at least 1 to 2 percent a year,” Claudio said, highlighting that retailers have contributed an average of PHP750 billion annually to the national economy through taxes between 2017 and 2022.

The contribution of the retail sector in terms of government revenues could be larger if online transactions were subject to taxes like those paid by brick-and-mortar stores, he emphasized.

Brick-and-mortar stores are defined as traditional businesses that offer or sell products and services to customers face-to-face in a physical office or store that the respective businesses own or rent, compared to online marketplaces that do not maintain such physical structures.

Online marketplaces are currently not subject to value-added tax (VAT) in the Philippines, giving them a competitive pricing edge of up to 17 percent over local retailers.

Claudio stressed that brick-and-mortar stores are paying 12 percent in VAT, with some also facing 5 percent duties.

Since most of the products in online marketplaces come from foreign markets like China, he said the current setup supports foreign retailers and poses a significant challenge to traditional local retailers.

The PRA official called on the government to fast-track the implementation of the Internet Transactions Act to level the playing field between physical and online stores in terms of taxes.