Exporters seek removal of 12% VAT on products

MANILA, Philippines — Philippine exporters are urging the government to push for the removal of the 12 percent value-added tax (VAT) on indirect export products, to allow the country to tap into new markets.

One of the biggest hurdles micro, small and medium enterprises (MSMEs) and exporters face in promoting and marketing Philippine-made products overseas is the VAT imposed under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act on indirect exports, Philippine Export Service Provider and Consolidators Association Inc. president Tomas Medina said at the Philippine Chamber of Agriculture and Food Inc. (PCAFI) briefing yesterday.

“Since the peso has devaluated at about 20 percent vis-a-vis the dollar, and you added 12 percent VAT, and the cost of imported inputs is 70 percent, you will find Philippine products to be 25 percent more expensive than its neighboring countries,” he said.

On top of the challenges of the pandemic, inflation and geopolitical order globally, the 12-percent VAT has prevented small producers from tapping more markets since their products are now more expensive.

“None of these small producers can go to the market if we will be charged at 12 percent. It will create a price level which markets will not be able to accept anymore and thus in a matter of a few more months, with the challenge of inflation and recession abroad, we will see a lot more MSMEs close shop,” Medina said.

He urged the government to create programs not only on raw material supply, packaging and support for promotions, but also the elimination of VAT on indirect exports.

In the meantime, he said the government can include exporters and consolidators under the Strategic Investment Priority Plan (SIPP) as a temporary solution to the VAT imposition.

The SIPP lists activities that qualify for investment incentives under the CREATE Act.

“The only avenue of exporters and consolidator see is if we will be included by Board of Investments in its for 2023 thus delegating the consolidators group and indirect exporters to become VAT free upon purchase of these goods from MSMEs,” Medina said.