Metro Manila (CNN Philippines, February 13) – The proposed value-added tax (VAT) refund for foreign visitors could boost tourism receipts by nearly a third, House Ways and Means chairperson and Albay Rep. Joey Salceda said on Monday.
“A simulated model shows that tourist spending on shopping, accounting for increased tourist arrivals as a result of the refund system, will increase to ₱76.58 billion, or a total increase of ₱17.6 billion in tourist sales, representing a growth by 29.8%,” Salceda said during his panel’s briefing with the Department of Finance on the proposal.
He said “a VAT refund system is expected to increase annual tourist expenditures on shopping from ₱59 billion to ₱69.62 billion, for VAT foregone revenues of around ₱7.08 billion, assuming the same tourist base.”
The Philippines is one of the few Asia-Pacific tourist destinations without a tourist VAT refund system alongside India and Cambodia, he said. Some hotspot Asia-Pacific countries that do offer VAT refunds to tourists include Singapore, Japan, and South Korea.
Citing a 2010 study, Salceda said high VAT rates on tourists were found to negatively affect consumption in hotels and restaurants.
“The multiplier appears to be, for every 1% in unrefunded VAT, the reduction in tourist consumption in hotels and restaurants is 1.5%,” he said.
In the Philippines, tourists are subject to the 12% VAT on goods and services.
To cushion the blow of full VAT refunds, Salceda suggested that the Bureau of Internal Revenue (BIR) charge a service fee to be paid to the collecting and refunding agent. He also proposed a minimum purchase value for tourists.
“While the president has approved the proposal of the PSAC [Private Sector Advisory Council] to institute a VAT refund system for tourist purchases, the National Internal Revenue Code, as amended, does not yet provide for a legal basis for such a system,” Salceda added. The PSAC’s proposal could take effect by 2024.
READ: Marcos eyes VAT refund program for tourists – Palace
His panel addressed this by forming a technical working group to iron out the language and implementation of the refund proposal. These could then be included in the provisions of the ease of paying taxes bill which the Senate will deliberate on soon, he said, referring to the measure which hurdled the House in October last year.
