THE Philippine Retailers Association (PRA) has projected the retail industry's contribution to the country's gross domestic product (GDP) will continue its upward trajectory.

"We feel that by the end of 2024 to early 2025, it should move up to about 20 percent," PRA President Bobby Claudio told reporters at the sidelines of the 30th National Retail Conference and Stores Asia Expo last August 29.

Data from the Philippine Statistics Authority (PSA) showed the country's GDP posted a year-on-year growth of 6.3 percent in the second quarter of 2024. Main contributors to the economic growth include construction with 16.0 percent; wholesale and retail trade, repair of motor vehicles and motorcycles with 5.8 percent; and financial and insurance activities with 8.2 percent. Claudio said that from 2017 to 2022, the retail sector contributed 18.6 percent to domestic GDP, and this has been growing by 1 to 2 percent annually. He said retailers had paid an average of P750 billion annually in various taxes, including value-added, income, municipal and excise taxes.This underscores the significant contributions of brick-and-mortar stores despite the growing number of online retailers, Claudio pointed out.

Online shopping currently comprises about 25 percent of retail expenditures, a significant trend that Claudio attributed to the effect of the Covid-19 pandemic.

The PRA chief discussed the tax implications of this shift, noting that online marketplaces are not yet required to impose value-added tax (VAT) on transactions, leading to a competitive disadvantage for traditional retail stores."Businesses are being taken out of brick-and-mortar stores because [consumers] are moving online, which we cannot blame because it's really a consumer benefit," Claudio said, noting the wider selection and even lower prices in online retail.He added that online selling platforms, which primarily earn revenue through commissions rather than directly selling goods, often do not pay VAT on products originating from foreign companies.

"The government is having a hard time tracking entry of this, [which] can be [in the] millions of deliveries a day," Claudio said.In response, local retailers are urging the government to address this issue by implementing regulations such as the Internet Transactions Act. The PRA said that this would ensure online marketplaces and foreign retailers follow the same tax standards as domestic businesses.