FOREIGN GUESTS | Tourists from China are interviewed by immigration officers as they arrive at Ninoy Aquino International Airport in this photo taken in January 2023. Foreign visitors will benefit from a value-added tax refund bill proposed by lawmakers. (File photo by GRIG C. MONTEGRANDE / Philippine Daily Inquirer)
MANILA, Philippines — The House ways and means committee has approved a mechanism that would allow foreign tourists to avail themselves of a refund of the value-added tax (VAT) on their purchases.
The committee on Monday passed an unnumbered bill substituting House Bill No. 7143, the earlier measure on the VAT refund mechanism filed by the panel’s chair, Albay Rep. Joey Salceda.
The measure is in line with President Marcos’ approval last month of the refund, as recommended by the Private Sector Advisory Council, the government’s consultative body composed of business leaders and industry experts.
Salceda pointed out that, except for India and Cambodia, the Philippines is 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,” said the lawmaker, whose bill further specifies that the refund system be administered by a service provider, as is the practice abroad where that mechanism is implemented.
The government collects a 12-percent VAT on goods sold in the country. The refund thus serves as an enticement to tourists in other countries.
‘Propensity to spend’
In approving the VAT refund, Mr. Marcos was targeting its implementation by next year.
Salceda’s initiative, therefore, aims to set in place that implementation.
His original bill set a minimum refundable purchase of goods at P2,000, which the substitute bill now pegs at P3,000.
According to the substitute bill, the goods must be purchased from accredited suppliers and be taken out of the country within 60 days from the date of purchase.
Salceda said the refund would “increase… the propensity to spend” among foreign tourists.
“Generally, for every P1 refunded, the tourist spends an additional P1.50. That will create an additional 20,000 to 80,000 jobs, and will also improve our gross international reserves,” he said.
He also projected an increase in sales among local suppliers between P10 billion and P40 billion.
The Department of Tourism said earlier that it was aiming to draw 4.8 million tourists to the country this year.
Last year the country generated an estimated $3.68 billion (P208.96 billion) in tourism revenues, based on the 2.65 million international arrivals, including some 630,000 visiting Filipinos from abroad, during that period.
But while the tax refund is intended as an incentive to foreign tourists, Mr. Marcos also approved in January the automatic inclusion of the travel tax in all airline ticket purchases.
Under that setup, passengers may be charged the full travel tax of P2,700 for first-class flights and P1,620 for economy-class flights.
Skepticism
The proposed refund also drew skepticism from a lawmaker.
ACT Teachers Rep. France Castro questioned the priority given to VAT refunds to foreign tourists.
“They prioritized giving refunds to foreign tourists who can afford to pay for a vacation and the VAT, instead of Filipinos who are hungry, jobless and suffering because of the lack of decent pay and rising costs of goods,” said Castro, the House deputy minority leader.
She said the Makabayan bloc had repeatedly sought the repeal of the excise on fuel products and other commodities in order to ease the prices of basic goods and services.
“The Marcos administration should prioritize the welfare of the Filipino people over foreign tourists,” Castro said.