PEZA warns of P250-B losses from VAT on local suppliers

MANILA, Philippines - The Philippine Economic Zone Authority (PEZA) has warned of annual losses running up to P250 billion for local suppliers of export-oriented firms once the value- added tax (VAT) exemption currently enjoyed by these suppliers is removed.

PEZA director general Charito Plaza had requested data from all PEZA locators across the country and found that they make an average of P250 billion worth of purchases from local suppliers annually.

Thus, PEZA is appealing to lawmakers to maintain the current set of incentives it offers to its locators, Plaza said.

While PEZA’s petition was not considered in the House of Representatives, Plaza said she would continue to push in the Senate for a status quo on the incentives the agency currently provides its locators.

The removal of the VAT exemption has been approved in the House of Representatives last May under House Bill 5636.

Replacing this is a 12 percent VAT on gross sales, which according to the Department of Finance, would be refunded within 90 days.

Plaza said removing that VAT exemption would likely push its locator industries to just import everything because importation would be cheaper, instead of buying from local suppliers.

“This will be a big loss to our local suppliers,” she said.

The removal of the zero VAT for local suppliers has likewise been an area of concern by industry groups such as the Philippine Exporters Confederation Inc. and the Semiconductor and Electronics Industries in the Philippines Inc. in the first package of the administration’s tax reform program.

Plaza said PEZA provides 80 percent of the country’s export income.

Latest data from the agency showed its exports rose 13.57 percent to $16.47 billion in January to April this year from $14.5 billion in the same period last year.

Direct employment generated by its locator industries, meanwhile, jumped 5.73 percent to 1.35 million during the four-month period from 1.27 million in the same period last year.

In terms of investment pledges, PEZA reported last week its approved projects in the first five months soared 98.14 percent to P107.75 billion from P54.38 billion in January to May last year.