Reconsider VAT refund, gov’t urged

More people visit Boracay in this March 11, 2022, photo due to relaxed travel restrictions as cases of COVID-19 continue to decrease. (Photo courtesy of JACK JARILLA)

MANILA, Philippines — The government should go easy on the proposal to allow foreign tourists to refund the value-added tax (VAT) on the goods they purchase during their travel in the Philippines, several senators said on Monday.

Senators Grace Poe and JV Ejercito said the government should ask tax and financial experts about the possible effects of the VAT Refund Program, which President Ferdinand Marcos Jr. had already approved based on the recommendation of the Private Sector Advisory Council.

“The Philippines is not really known as a shopping destination, but more for tourism and recreation. But then again, [if] the benefits will offset the revenue lost on VAT collections, then we can consider,” Ejercito told the Inquirer.

Poe said the Marcos administration should weigh the advantages and disadvantages of such a policy before rolling it out next year.

“Will it encourage tourists to come in and spend more and offset possible VAT revenue loss?” Poe asked.

Sen. Nancy Binay said the Department of Finance (DOF) should be ready to present data and other figures regarding the impact of the VAT refund program on the government’s annual earnings and its financial capacity.

The DOF, she added, should also be able to show how it would be implemented in retail stores, airports, and other commercial establishments.

‘To attract tourists’

For Senate Minority Leader Aquilino Pimentel III, legislation was needed, not just an executive action, for the tax incentive since the collection of VAT was imposed through the passage of a law.

Asked if he would support such an initiative, Pimentel said: “Yes, other countries do this as a strategy to attract tourists.”

“But we need [an] airtight law as well as an efficient and accurate system. Theory and practice,” he said.

Sen. Juan Edgardo Angara, the chair of the Senate finance committee, echoed Pimentel’s observation that many countries had been providing similar tax perks to boost their tourism.

“It’s worth exploring since in the long run, it may prove to be a win since it may attract and encourage more tourist spending,” Angara said in a Viber message. Meanwhile, a group of farmers on Monday urged Mr. Marcos to prioritize scrapping the oil excise to ease the impact of inflation instead of providing VAT refunds for foreign tourists.

“The government should first respond to the public’s call to remove the VAT on oil so that the price of petroleum products will decrease,” Danilo Ramos, chair of the Kilusang Magbubukid ng Pilipinas (KMP), said in a statement.

KMP said removing the tax on oil would give “immediate relief” to Filipinos and help in controlling inflation.

Remove tax on oil

“Removing the excise and VAT on oil will remove P6 per liter from diesel, P5.35 per liter for unleaded gasoline, and P3 per kilogram of LPG (liquefied petroleum gas),” the farmers’ group said, noting that the Filipinos were still reeling from the impact of oil price hikes last year.

According to KMP, the net year-to-date price increase in 2022 was at P14.90 per liter for gasoline, P27.30 per liter for diesel, and P21.30 per liter for kerosene.

The Alliance of Concerned Teachers (ACT) also criticized the VAT refund program, saying that it was “highly unfair” that Filipino consumers were forced to pay the tax while foreigners would be exempted from it.

“While we are calling for the removal of VAT on basic goods to bring down the price of daily necessities, foreign tourists were given the VAT refund first,” said Vladimer Quetua, ACT chairperson.

“What government prioritizes the welfare of foreigners over its own citizens?” he said.