Exporters back enhanced VAT refund

MANILA, Philippines - The Philippine Exporters Confederation Inc. (Philexport) has lauded an “enhanced value-added tax (VAT) refund system” for export sales as proposed in the comprehensive tax reform package approved at the Lower House.

In a statement, the umbrella organization of Philippine exporters said it is pleased with the system as provided under House Bill (HB) 5636 which was approved on third and final reading in the House of Representatives last Wednesday.

Under this refund scheme, Philexport said exporters must be given their actual refund or informed of the denial of their application for refund within 90 days of the filing of the VAT refund application.

The group in earlier position papers submitted to legislators reported the hardships exporters encounter in getting VAT refunds for their export sales, with some unable to get back the accumulated VAT they had paid for years.

However, the group continued to express reservations to certain provisions of the bill.

Philexport, in particular, voiced out its disappointment that indirect export sales were not included in the zero VAT rate and refund system, saying this will have an adverse effect on local suppliers to export processing zones in the Philippines.

The group said retaining zero VAT exemption for indirect exporters would help direct exporters to be price competitive while easing their cash flow, as they do not have to advance payments of VAT for locally sourced raw materials and services.

It likewise encourages exporters to source from domestic producers of goods and services, thus increasing the overall local trade, creating inclusive growth, and expanding value-added of industries.

“Moreover, it motivates domestic industry to upgrade quality and develop upscale products for international market, while helping to diversify local industries to serve both local and foreign markets and promote job creation to help reduce poverty,” Philexport said.

The group said the tax reform bill wants to do away with the zero VAT rate for indirect exporters due to perceived leakages.

Philexport, however, is suggesting concrete measures to stem leakages from the supposed recycling of VAT certificates. One suggestion is for the government to set up a track-and-trace system that will identify legitimate transactions that qualify as zero-rated VAT.

Aside from the removal of the zero VAT rate for indirect exporters, the group is also against the imposition of an excise tax on sweetened beverages as recommended under HB 5636.

The group said an excise tax of P10 per liter of sugar-sweetened beverage would raise the prices of certain goods including coffee, powdered concentrate, and tea drinks.

Aside from hurting the beverage industry, the tax will also result in reduced government revenues, economic contraction, and job losses, it added.