House panel OKs VAT refund for outbound tourists

MANILA, Philippines — The ways and means committee of the House of Representatives approved yesterday the draft substitute bill for the value-added tax (VAT) refund for outbound tourists, a proposal that President Marcos had approved in principle.

Panel chairman Albay Rep. Joey Salceda authored the measure along with senior vice chair Nueva Ecija Rep. Mikaella Suansing, who headed the technical working group (TWG) that made amendments to the original draft.

The Salceda committee approved House Bill 7143 that proposed raising the threshold of VAT refund for foreign tourists to P3,000, from P2,000, on goods they have purchased from accredited retailers.

“I expect between P10- to P40-billion increased sales from local suppliers. That has the same nature, consequence and character as exports. And we don’t even have to compete with other exporters. The audience is already captured,” he said.

“Save for India and Cambodia, we are the last major Asian country without an operative VAT refund system for tourists. That hurts our competitiveness for tourists with, say, Vietnam and Thailand, which now receive more tourists than we do,” Salceda lamented.

Data provided to the Salceda panel showed that among some of its neighbors in Southeast Asia, the Philippines lagged behind the VAT refund mechanisms implemented by Vietnam (P4,662.06), Malaysia (P3,758.46), and Thailand (P3,321.02).

The proposal adds a new Section to the National Internal Revenue Code, where outbound tourists are to refund goods to be taken out of the country, with a per transaction value of at least P3,000. These goods must be purchased from accredited suppliers.

The bill likewise proposes that refunds will only be done through businesses registered under the Bureau of Internal Revenue (BIR).

Goods would be eligible for VAT refunds within 60 days since the purchase of items, which should cost at least P3,000.

That amount is still subject to discussion. The proposed threshold could still change as administrative costs and inflation as well as economic pressures are factored in.

Increased spending

According to its proponents, the plan to refund the VAT of foreign tourists is seen yielding as much as P42 billion in increased spending amid the propensity of travelers to consume more with such a reimbursement mechanism.

Based on the study of the TWG led by Suansing, the 12-percent VAT refund could increase spending by at least P10.6 billion to as much as P42.3 billion in the first full year of implementation.

The TWG is composed of some lawmakers as well as the Department of Finance (DOF), Department of Tourism (DOT), BIR and Bureau of Customs.

“Based on our simulation, we are looking at the marginal propensity for tourists to consume and spend more. For every P1 forgone, 1.5 times is the return to the economy,” Suansing said. “You regain what you lose because of the incremental spending injected into the economy. You also generate jobs down the line because of economic activities that’s happening.”

Finance Assistant Secretary Dakila Napao said the DOF is fully supportive of the bill while BIR lawyer Brianna delos Santos noted that VAT refund encourages foreign tourists to shop and spend more which will redound to income for local retailers.

The TWG also noted that accredited retailers who can participate in the VAT refund program are those registered with the BIR and use a point-of-sale machine for better administration and monitoring.

Likewise, the TWG clarified that a tourist eligible for the refund should be a foreign passport holder who is a non-resident individual and not engaged in trade or business in the country.

Nonetheless, dual citizens will be allowed to avail themselves of the refund. Lawmakers also retained the original proposal of 60 days as the duration by which goods need to be exported.

Boost

At the same time, Salceda called on the DOT to consider amendments to the Tourism Act or Republic Act 9593, to allow DOT to grant promotional incentives for domestic tourists, particularly in the meetings, incentives, conferences and exhibitions (MICE) sector.

He made the request specifically to Undersecretary Shireen Gail Pamintuan who attended the hearing. “I am requesting the DOT to look into a more expansive definition of incentives for the domestic tourism sector,” Salceda urged.

“I am also directing Suansing to look into possible amendments on the matter. I understand that the MICE sector is the bulk tourism sector of the country. So, when you incentivize the MICE sector, you incentivize tourists wholesale,” he said. – Louise Maureen Simeon