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SC reversal on tax refund case alarms investors

Business confidence being undermined, says ECCP official
By: - Reporter / @daxinq
/ 10:53 PM April 21, 2013

Foreign businessmen from several foreign chambers of commerce have voiced their concern over a recent Supreme Court ruling that denied the value-added tax (VAT) refund claims of a large foreign investor in the country.

In a statement, European Chamber of Commerce of the Philippines (ECCP) vice president for external affairs Henry Schumacher said the decision of the high tribunal to overturn the P483.8-million tax refund of San Roque Power Corp. “based on a technicality” endangered the tax refund claims of more than 100 foreign firms in a similar position.

He also said that the Supreme Court ruling—made last February in which it overturned an earlier decision of the Court of Tax Appeals (CTA) as well as reversed an earlier Supreme Court decision—“undermines the efforts of the government and the Joint Foreign Chambers to bring more investments into the country.”


“The business environment remains super bureaucratic, business-unfriendly, and investment incentives are often not delivered,” Schumacher said. “Emphasis is always put on convincing new investors to invest here. Unfortunately, it is often forgotten that you have to treat ‘old’ investors well, too.”

In a bid to highlight his position, Schumacher pointed to the $1.2 billion in investments made by San Roque Power to build one of Asia’s biggest hydroelectric power plants in the province of Pangasinan to provide 411 megawatts of electricity to the Luzon power grid.

In February, the Supreme Court ruled that San Roque Power was ineligible to claim P483.8 million in refunds “based on technicalities,” he said.

San Roque Power initially got a favorable decision from the CTA and the Supreme Court, but this was reversed after the commissioner of the Bureau of Internal Revenue filed an appeal.

In reversing its decision, the Supreme Court cited San Roque Power for bringing its tax refund demand to the CTA even when the BIR itself has yet to decide on the issue’s merits within a prescribed 120-day period.

The power firm, on the other hand, pointed to long-standing practice within the business community of bringing tax refund issues before the CTA even before a final decision by the BIR has been made—something that tax authorities have never objected to until this case.

San Roque Power also pointed out that a change in established procedures such as that which would result from the February Supreme Court decision should apply only prospectively and not retroactively.

“As a business community we are worried, as technicalities have overruled the justified refund of the VAT and  because the ruling was made retroactive,” Schumacher said. “This is unfair. If the Supreme Court feels that new rules have to be established, then we appeal they do it prospectively.”


“The decision of the [Supreme Court] concerns us as there are more than 100 other companies that are in the same position as them. In other countries, refunds are given to companies after several weeks. Here in the Philippines, holding them for more than 10 years has been the trend,” he added.

The ECCP official noted that the government should realize foreign companies that have placed hundreds of millions of dollars in investments into the country also acted as ambassadors to attract other companies looking to establish operations in the Philippines.

The Japanese Chamber of Commerce and Industry of the Philippines, of which San Roque Power is a member, has echoed the same views in recent discussions with the Department of Finance, Schumacher said.

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