The government will commit a “grave mistake” if it would remove all value-added tax (VAT) exemptions, as this would make a number of industries less competitive, the Philippine Exporters Confederation (Philexport) said.
Philexport President Sergio R. Ortiz-Luis said VAT-exempted industries will “suffer heavily” if they will be stripped of their tax privilege. Take the case of exports, he said, wherein “little changes” could have a big impact on the sector.
“My initial impression [is that the] rate [of] VAT was a product of a lot of discussions and studies in the past, even the exemptions. It has worked so well that [it] propelled the growth of Philippine economy,” Ortiz-Luis told the BusinessMirror. “I don’t see the logic of tinkering with it [VAT exemptions] at this stage,” he added.
Last week Finance Secretary Carlos G. Dominguez III said the national government is amenable to reducing the VAT rate, as proposed by Sen. Risa N. Hontiveros, if all lines of exemptions are eliminated.
Hontiveros has recently filed Senate Bill (SB) 1671, or the “Bawas VAT” bill, which intends to trim the VAT rate to 10 percent from 12 percent, to provide relief to consumers hit by the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) law.
The TRAIN had several VAT exemptions removed, except on raw food, agricultural products, renewable energy, health and education, as well as for senior citizens, persons with disabilities, cooperatives and direct exporters.
This, for Ortiz-Luis, is not enough for the government to tinker with VAT. “There are issues [in the] TRAIN that should be addressed, but to touch VAT that was a product of a long study and [is] very successful is something else.”
“If there’s a problem with the implementation with TRAIN, government must work on it, but don’t touch other items,” he added.
The Philexport chief explained exporters benefitted significantly from being exempted from VAT, and this contributed to the growth of the country’s economy. Thanks to the tax privilege, he said exporters have remained competitive in the past decade.
Senators are currently assessing Hontiveros’s measure to reduce the VAT rate and Dominguez’s counter offer to remove the exemptions. The VAT rate was increased to 12 percent, from 10 percent in 2006.