Top exporters urge resolution on VAT zero-rating

By Kris Crismundo

March 21, 2023, 6:43 pm

<p><em>File photo</em></p>

File photo

MANILA – The country’s major exporting industries -- semiconductors and electronics, information technology and business process management (ITBPM) and garments and wearables -- appealed to the government Tuesday to immediately issue the resolution on value-added tax (VAT) zero-rating for exporters’ purchases.

In a joint statement of the IT and Business Process Association of the Philippines (IBPAP), Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) and the Confederation Wearables Exporters of the Philippines (Conwep), the industry groups called on the need to release the document before the end of the month.

“A solution has been promised by the end of the month which also coincides with the end of the first taxable quarter. As exporters, these three industries have claimed VAT zero-rating on their purchases consistent with existing local regulations and globally accepted principles allowing for the sectors to remain competitive,” they said.

The Fiscal Incentive Review Board (FIRB) is finalizing the resolution.

The industry groups said failure to resolve the VAT zero-rating issue by end of this month “will have detrimental effects to these three sectors particularly in sustaining their growth potential”.

“The understanding of the sectors is that most of the government agencies involved in resolving the issue believe that there is clear basis for all purchases of exporters to be without the 12 percent VAT, given that this is not only allowed by the rules but is more importantly critical in ensuring that the prices at which the services and goods offered are able to remain competitive in the international market,” they added.

IBPAP, SEIPI and Conwep also underscored the need to address the confusion on the VAT issue for indirect exporters, such as healthcare, power, raw materials and other integral goods and services being provided to exporters.

“It is believed that the failure to address the VAT issue may have a crippling consequence on the parts localization initiatives of exporters and particularly affect their local suppliers who will be more at risk should they lose their market,” the groups said.

It added that investment promotion agencies like the Philippine Economic Zone Authority, Board of Investments, Clark Development Corporation, Authority of the Freeport Area of Bataan, among others, are in the best position to endorse list goods and services eligible for VAT zero-rating purchased by exporters from Philippine-based suppliers.

IBPAP, SEIPI and Conwep cited that their industries’ combined contribution to the country’s exports of goods and services in 2022 reached USD89 billion, or 69 percent of the country’s total export revenues last year, sharing 20 percent to total gross domestic product in 2022.

The semiconductors and electronics, ITBPM and garments and wearables sectors are also directly employing 2.5 million Filipinos and created 6.75 million indirect jobs.

“Their ability to further contribute to the country's GDP and reach their potential to provide employment to millions more Filipinos depend so much on having clear and consistent government policies and regulations. These are essential to ensuring ease of doing business and cost competitiveness, which always rate highly in the decision of existing and prospective investors in choosing their investment locations,” the industry groups said. (PNA)