Senate okays bill on VAT refunds for foreign tourists

Sen. Sherwin Gatchalian —Niño Jesus Orbeta

MANILA, Philippines — The Senate has approved on the third and final reading a proposed measure that aims to boost tourism by allowing foreign visitors to claim value-added tax (VAT) refunds for buying P3,000 worth of local goods.

With 20 affirmative votes, one negative vote, and no abstention, Senate Bill No. 2415, or An Act Creating a Vat Refund Mechanism for Non-Resident Tourists, adding a New Section 112-A to the National Internal Revenue Code of 1997, was approved in the plenary on Monday.

READ: Pimentel opposes bill outlining VAT refund for tourists

Sen. Sherwin Gatchalian, chair of the committee on ways and means, and sponsor of the bill, said the refund scheme would serve as a potential marketing tool—“a means to unveil the beauty of our nation to the global stage.”

Quoting the National Economic and Development Authority’s assessment, he said the proposed fiscal reform was projected to generate around P3.3 billion to P5.7 billion yearly from 2024 to 2028.

He added that it was also expected to create additional employment opportunities of 4,400 to 7,100 during the same period.

“Moreover, the grant of a VAT refund can encourage purchases from tourists, especially since shopping has emerged as a motivating factor for travel in recent years,” Gatchalian said.

Senate Minority Leader Aquilino Pimentel III, the lone dissenter to the bill, said it could lead to P4 billion worth of revenue losses as he urged the government to focus instead on improving the tourist experience and infrastructure.

He stressed that while the Philippines has the highest VAT rate in Southeast Asia, the government’s collection efficiency was only at 40 percent, the lowest in the region.

“Instead of giving P4 billion away to foreign tourists, we should direct these funds toward programs and projects that directly benefit the Filipino people. If we truly want to boost tourism, let us invest directly in tourism by improving our infrastructure and enhancing the overall tourist experience,” Pimentel said.