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‘Decline in SM cinema, event ticket sales hurts local govts’

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Local government units (LGUs) suffered an estimated 85-percent drop, or P320.92 million, in amusement tax revenue from SM Prime Holdings as of September last year, as cinema and event ticket sales plummeted due to Covid-19-induced lockdowns.

Using data from SM Prime Holdings’ financial reports, state-run National Tax Research Center (NTRC) estimated that total amusement tax collected by LGUs from SM Cinema and event ticket sales as of the third quarter of last year plunged to P55.47 million, from P376.39 million in the same period in 2019.

The total price of SM Cinema tickets includes a 10-percent amusement tax as well as cultural tax and other applicable ordinances of the concerned LGUs.

“Due to the suspension of cinema operations from the first quarter of 2020, cinema and event ticket sales dropped by 74.62 percent, from P4.14 billion in the third quarter of 2019 to P0.61 billion in the third quarter of 2020,” NTRC said in its journal titled “Impact of the Coronavirus Disease of 2019 Pandemic on Local Amusement Tax Collection of Local Government Units in the Philippines.”

However, NTRC said mall amusement taxes do not comprise the whole amusement tax collection in the Philippines.

Moreover, the figure provided by the NTRC also does not yet include information from other cinema proprietors, which were also affected by the lockdown.

For Metro Manila alone, 150 cinemas are owned by SM while 283 other cinemas are owned by other malls.

“Hence, the inclusion of information from other cinema proprietors, which also stopped operations during the lockdown, would mean a significant decrease in the amusement tax collection,” it said.

Like the local amusement tax revenue, NTRC is expecting the national amusement tax take to decline because of the pandemic, noting that cockfighting events were also cancelled.

Given the financial impact of Covid-19 pandemic on tax revenue, NTRC said LGUs must find and explore other means to increase their revenue sources such as the imposition of local amusement tax.

For instance, NTRC said local amusement tax may be “broadened to include places that may be considered as place of amusement.”

Since the pandemic suspended or cancelled most, if not all, entertainment shows and programs, the think tank said LGUs can look into tapping online streaming shows as sources of amusement tax revenue.

“People are advised to stay at home and limit leaving their residences and avoiding populated areas. Their constant seclusion encourages people to access video streaming sites as a form of entertainment. The case of Chicago may be taken into consideration in studying the feasibility of imposing local amusement tax on video sites and subscription channels,” it said.

NTRC also urged Congress to review the Local Government Code to “align the limitations and taxing powers of LGUs to modern business models.”

“For instance, expanding the coverage of local amusement tax may be explored by policymakers to provide additional revenue to LGUs. Expanding the local amusement tax coverage will give sufficient leeway for the local Sanggunian to explore other activities that may be covered by the local amusement tax,” it said.

Read full article on BusinessMirror

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