THE House of Representatives on Monday endorsed for Senate approval a bill creating a value-added tax (VAT) refund mechanism for non-resident tourists.
This, after lawmakers—voting 304 affirmative and 4 negative—approved on third and final reading House Bill (HB) 7292 to expand the country’s competitiveness in tourism vis-à-vis its peers in the regions.
The bill seeks to allow foreign tourists to claim a VAT refund on purchased goods worth at least P3,000 per transaction from accredited retailers. The measure also entitles tourists to claim VAT refund through service providers on goods purchased.
The bill, however, provides that goods must be taken out of the country within 60 days from the date of purchase.
HB 7292 also seeks to empower the secretary of the Department of Finance to adjust the threshold, taking into account administration costs in process refunds, consumer price index and other market conditions, upon the recommendation of the Tourism Secretary and the chief of the Bureau of Internal Revenue.
The bill defines tourist as a foreign pass holder who is a non-resident individual not engaged in trade or business in the Philippines,
The principal author of the bill, House Committee on Ways and Means Chairman Joey Sarte Salceda, said this proposal was already approved in principle by President Ferdinand R. Marcos Jr. when it was brought up by the Private Sector Advisory Council.
Captured audience
SALCEDA said he expects between P10 billion to 40 billion in increased sales from local suppliers for the first year of the implementation of the provision in the bill, if it’s enacted into law.
“That has the same nature, consequence and character as exports,” the lawmaker added. “And we don’t even have to compete with other exporters: the audience is already captured.”
The proposal added a new Section to the National Internal Revenue Code, which allows outbound tourists to refund goods to be taken out of the country, with a per transaction value of at least P3,000 (nearly $55 at current exchange rates). These goods must be purchased from accredited suppliers.
“A VAT refund, as global studies show, increases the propensity to spend. Generally, for every P1 refunded, the tourist spends an additional P1.50,” Salceda said. “That will create an additional 20,000 to 80,000 jobs and will also improve our gross international reserves.”
The Philippines recorded 2.65 million (2.02 million foreign tourists and 628,445 Filipinos overseas) visitors from February to December 2022.
This figure is higher than the 2021 tourist arrivals of 163,879 but still significantly lower than the pre-pandemic level of 8.26 million.
This year, the Department of Tourism targets to welcome 4.8 million visitors, which could generate P2.58 trillion in revenue.
Image credits: Joel Paredes