The hidden dollar tax on Philippine AI startups

I knew about the dollar cost the day I upgraded my first artificial intelligence (AI) assistant. You start free, right? But when you want better results, more access, more features, you have to upgrade. And the price shows up in US dollar, charged to the company card every month.

When they charge it and you convert it to pesos, you do the calculation in your head and you realize you’re actually paying more than other people across the world. With the peso getting weaker, it just gets worse. On Sept. 8 the peso closed at P62.625 to the dollar, its 23rd record low this year.

And you’re not paying for just one AI assistant. You’re paying for several. When you want access to better models, or when your tokens and usage reach your quota, you have to look for another tool. So you switch between different AI systems, which means different costs across all of these tools, each one billed in dollars. Every time the peso weakens, you realize you’re paying too much on every single exchange.

It gets very painful once you add up all the costs. A startup only has so much budget. When you redirect that budget from human resources to AI tools, it quickly adds up, and you suddenly realize, hey, I should have just hired a human with this kind of cost.

But what can we do? A startup has to use every means necessary to reach its goal. If you can’t hire at your budget, you look for the right tool or AI assistant. Then you become so reliant on it that the costs end up at the same rate as an actual full-time human.

One weekend I left my machine running at home and worked from my phone while I ran errands. My agent was in the middle of a task for work. Then I got the message: the tool tried to charge the company card, couldn’t, and stopped my access. To fix it I had to withdraw from the bank and transfer to the credit card.

But the worst thing was realizing it was the weekend, and any bank transfer takes business days. So I ended up charging it to my personal credit card just so I could keep working.

And yes, I do work on weekends. It’s become a habit to constantly check my phone and let my agents run on a task as I go. When the charge came through, the conversion rate hit me. I was like, hey, I’m paying this much, just to get the maximum tier so I can access the better models and have more tokens. Which reminds me, I still have to change that card before the next billing cycle.

Who codes by hand these days? We’re about to reach the stage where AI agents write most of the code. So just imagine your screen just sitting there, waiting for your next command, telling you that you’ve hit your limit this week. Your work just stops. I mean, it’s the most painful thing ever. Worse if you’re in the middle of launching something and you just need to edit this one more thing or press just one more button. If you’ve played Civ, you know the feeling of wanting just one more turn. And you just can’t. It’s very, very frustrating.

Then the taxes pile on top of the exchange rate. Since June 2025, digital services from foreign companies carry 12 percent value-added tax (VAT) under Republic Act No. 12023. My customers here have gone back and forth with me asking about tax treaties, because paying a foreign company can mean a 25 percent final withholding tax. We’re a cross-border startup, registered in Singapore, with clients in the Philippines. Meta charges Filipino businesses for ads every day. Why does the pressure land on small startups like us? It’s a bit unfair, right? Running a startup is really, really hard on its own.

What I wish the Bureau of Internal Revenue (BIR) and Congress understood: frontier AI models are priced in US dollar, but they were trained on the knowledge of the whole of humanity. Filipino startups deserve a piece of that pie. And it’s not like the government is giving us a sovereign AI we can access for cheap, as Filipinos.

We hear it all the time. Everyone needs to know how to use AI. Small businesses have to adopt. Businesses have to digitalize. But nobody mentions that using these tools adds so much to the cost of running a business, and running a business in the Philippines is already very hard. They keep pushing us to adopt. But then, where’s the support?

INQtoon: September 25, 2026

Two things would help. Let startups be recognized under the Innovative Startup Act, RA 11337, buy AI and cloud services without the 12 percent VAT for their first three years. And have the BIR state in plain writing that a monthly software subscription from a foreign vendor is not subject to the 25 percent withholding tax.

We have a weak currency, and the tools we need to run our businesses are priced too high for us already. Let’s not add to it.

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Fleire Castro is the founder of Dasho, an AI content compliance company, and of Third Team Media. She has 18 years in digital marketing and is a 2018 US State Department YSEALI Professional Fellow.