Philexport lauds improved VAT scheme for exports

The Philippine Exporters Confederation, Inc. (Philexport) welcomed the implementation of an “enhanced VAT refund system” for export sales as proposed in the Lower House-approved comprehensive tax reform package. 

Philexport, the umbrella organization of Philippine exporters, said it was pleased with the system as provided under House Bill (HB) No. 5636. The tax reform bill was approved on third and final in the House of Representatives on May 31.

Under this refund scheme, exporters must be given their actual refund or informed of the denial of their application for refund within 90 days of the filing of the VAT refund application.

In earlier position papers submitted to legislators, Philexport relayed the hardships exporters encounter in getting VAT refunds for their export sales, with some reportedly unable to get back the accumulated VAT they had paid for years.

At the same time in the same paper, Philexport expressed disappointment that indirect export sales were not included in the zero VAT rate and refund system, saying this will have an adverse effect on local suppliers to export processing zones in the Philippines.

In appealing to retain zero VAT exemption for indirect exporters, Philexport said it helps direct exporters to be price competitive while easing their cash flow, as they do not have to advance payments of VAT for locally sourced raw materials and services.

It likewise encourages exporters to source from domestic producers of goods and services; thus, increasing the overall local trade, creating inclusive growth, and expanding value-added of industries.

Moreover, it motivates domestic industry to upgrade quality and develop upscale products for international market, while helping to diversify local industries to serve both local and foreign markets and promote job creation to help reduce poverty.

The tax reform bill wants to do away with the zero VAT rate for indirect exporters due to perceived leakages.

But Philexport is suggesting concrete measures to stem leakages from the supposed recycling of VAT certificates.

One is for the government to set up a track-and-trace system that will identify legitimate transactions that qualify as zero-rated VAT.

At the same time, the trade association said it is opposed to the imposition of an excise tax on sweetened beverages as recommended under HB No. 5636.

The umbrella organization of domestic exporters said an excise tax of P10 per liter of sugar-sweetened beverage will raise the prices of certain goods including coffee, powdered concentrate, and tea drinks.

Aside from hurting the beverage industry, the tax will also result in reduced government revenues, economic contraction, and job losses.

It is also expected to affect the income of sari-sari stores, which make up 91 percent of retail stores in the country, as 31 percent of sari-sari store sales come from carbonated beverages.