Solon moves to resolve VAT issues in indirect exports

THE chairman of the House Committee on Ways and Means vowed to resolve value-added tax (VAT) issues among indirect exporters through a resolution and amendments to the National Internal Revenue Code.

In a statement issued last Monday, House Committee on Ways and Means Chairman Joey Sarte Salceda said he directed the committee secretariat of the House tax panel to prepare “a committee report on this resolution.”

Salceda also ordered the filing of a bill to amend Section 311 (“Investments Prior to the Effectivity of This Act”) of the Corporate Recovery and Tax Incentives for Enterprises Act, or “Create,” law and other relevant sections of the National Internal Revenue Code, as amended, to resolve issues regarding the VAT treatment of indirect exporters and local suppliers of direct exporters.

The implementing rules and regulations of Republic Act (RA) 11534 restricted VAT zero-rating to items directly and exclusively used for exports and to registered exporters. However, Salceda pointed out that “the law did not make the latter distinction.”

The solon said the Bureau of Internal Revenue (BIR) reports there are 4,136 registered export enterprises.

“However, this is a small portion of the universe of those affected by the change in VAT treatment. The entire downward linkages of the export sector, especially small businesses with few resources for VAT refund applications, are bearing the costs,” Salceda said.

“And of course, if they are unable to refund their costs, our export prices go up, costing us our competitiveness. This is why for two years now the Committee has sought relief from the FIRB [Fiscal Incentives Review Board] on this matter,” he added.

Clarify ambiguities

WITH this, Salceda said that the committee will file a resolution expressing the legislative intent of the Create Law (RA  11534), as well as a bill clarifying ambiguities in both RA 11534 and RA 10963 (Tax Reform for Acceleration and Inclusion, or Train Law) for indirect exporters and local suppliers.

The lawmaker earlier said that the veto of the Train law’s provision on VAT perks for some local suppliers and enterprises does not amend the law, or supersede the more recent Create law.

“The President’s veto cannot amend the law. And in this case, the law did not make a distinction about who is VAT zero-rated and who is not. Neither should the implementing rules, or the implementor,” he added.

According to Salceda, “a more logical fix is for the FIRB not to tie its own hands, since that benefit may be useful in attracting a desirable investment in the future.”

“Instead, as is intended, the FIRB can grant the VAT zero-rating incentive on an applicant-to-applicant basis, rather than close down the entire incentive for local suppliers,” he added.

According to Salceda, people from Albay are either suppliers of exporters or exporters themselves.

“We have a big footprint in the handicrafts export business. And their size of businesses are the ones being hurt by this interpretation,” he said. “In the interest of export competitiveness, let’s settle or correct this issue once and for all.”


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