VAT on local inputs of exporters under review

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FINANCE SECRETARY CARLOS G. DOMINGUEZ III

THE FINANCE department is reviewing a Bureau of Internal Revenue (BIR) regulation that imposes a 12% value-added tax (VAT) on previously exempt raw materials and packaging supplies sold by local manufacturers to exporters.

“We will review it and we will implement it according to the law. Now, the law, unfortunately, is not very fair… We will implement it strictly as we are sworn to do,” Finance Secretary Carlos G. Dominguez III said at a forum by Financial Executives Institute of the Philippines (FINEX) on Wednesday.

Exporters and foreign chambers last week asked the government to repeal Revenue Regulations (RR) No. 9-2021, saying this would further dampen investor sentiment and force companies to import their raw materials instead.

In a separate Viber message to reporters, Mr. Dominguez said the review should be completed before the end of the month.

Mr. Dominguez said the regulation has been “technically deferred” since tax provisions under CREATE only took effect starting July, and the deadline for VAT returns is at the end of the third quarter.

Philippine Economic Zone Authority (PEZA) Director-General Charito B. Plaza had asked the BIR to defer the effectivity of the regulation while the review is ongoing.

“The deferment of VAT RR, and ultimately repeal its insertion in the CREATE, is a big breather to export companies and domestic MNEs (multinational enterprises) who are suppliers to exporters,” Ms. Plaza said in a Viber message on Wednesday.

“This will lead to the realization of PEZA’s goal to make the country’s production, manufacturing and export -driven economy and convert the country to become self-reliant, self-sustaining and resource-generating put a stop to our being an import and consumption-dependent economy and make the Philippines a contributor to the global supply chain,” she added.

The BIR earlier defended the regulation, saying it was in compliance with the Tax Reform for Acceleration and Inclusion (TRAIN) law which mandates the agency to impose the 12% VAT once the 90-day refund system is in place.

However, exporters argued that the issuance conflicts with certain provisions under the newly enacted Corporate Recovery and Tax Incentives for Enterprises (CREATE) law which retained the zero-tax rate for exporters. — B.M.Laforga