Thailand
Philippines: Export groups await resolution on VAT zero rating
MANILA, Philippines — Three major export industry groups representing the information technology business process management (IT-BPM), semiconductor/ electronics, and the garments/ wearables industries are waiting for a resolution on the value added tax (VAT)-zero rating issue currently being finalized by the government through the Fiscal Incentives Review Board (FIRB).
“A solution has been promised by the end of the month, which also coincides with the end of the first taxable quarter,” the IT and Business Process Association of the Philippines (IBPAP), Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI), and the Confederation Wearables Exporters of the Philippines (CONWEP) said in a joint statement yesterday.
“The inability to address this serious and pressing matter by the end of March will have detrimental effects to these three sectors, particularly in sustaining their growth potential,” the groups said.
As exporters, the groups claim that a VAT zero-rating on their purchases is consistent with existing local regulations and globally accepted principles allowing for the sectors to remain competitive.
“The understanding of the sectors is that most of the government agencies involved in resolving the issue believe that there is clear basis for all purchases of exporters to be without the 12 percent VAT, given that this is not only allowed by the rules but is more importantly critical in ensuring that the prices at which the services and goods offered are able to remain competitive in the international market,” the groups said.
According to the groups, the same issue has also given rise to confusion on the part of the various industries engaged as suppliers of goods and services to the export sectors, such as the providers of healthcare, power, raw materials, and other integral services.
They emphasized that failure to address the VAT issue may have a crippling consequence on the parts localization initiatives of exporters and particularly affect their local suppliers who will be more at risk should they lose their market.
The groups shared that in several meetings among representatives of the three export sectors with government officials, there is strong agreement that this is the biggest issue they are all currently facing.
“In discussions about this issue, the Investment Promotion Agencies (IPAs) such as the Philippine Economic Zone Authority (PEZA), Board of Investments (BOI), Clark Development Corporation (CDC), Authority of the Freeport Area of Bataan (AFAB), among others, are deemed to be in the best position to determine and endorse list of goods and services eligible for VAT zero-rating purchased by exporters from local suppliers,”the groups said.
They stressed that the three export industries they represent have a combined exports contribution of $83 billion, 69 percent of the total goods and services exports, contributing 20 percent to the country’s overall GDP in 2022.
In addition, the said industries currently have approximately 2.5 million direct and 6.75 million indirect employees who depend on the capacity of these three sectors to survive and compete.
“Their ability to further contribute to the country’s GDP and reach their potential to provide employment to millions more Filipinos depend so much on having clear and consistent government policies and regulations,” the group said.
“These are essential to ensuring ease of doing business and cost competitiveness, which always rate highly in the decision of existing and prospective investors in choosing their investment locations,”they said.
Source: https://www.philstar.com/business/2023/03/22/2253374/export-groups-await-resolution-vat-zero-rating